The Scottish Budget predictions
Kate Forbes, the Scottish Finance Secretary, delivers the Scottish Budget today, 9th December, and most notably post the UK Autumn Budget on 27 October. Will the Scots get an early Christmas present? Will there be changes to the tax system? Or a focus more on spending measures for the year ahead?
Just like the rest of the UK. the COVID pandemic has brought financial pressures to the Scottish public finances, with the focus firmly on investment in the health service and health measures, as well supporting individuals and business financially through the pandemic.
What tax measures could be announced?
Most of the Scottish tax regime is controlled by Westminster, but some taxes are devolved most notably income tax. The Scottish government, have the power to change income tax rates and tax bands for Scottish income taxpayers. Indeed, he Scots already pay more tax at the basic rate when earning £27,000 or more a given tax year, currently.
Given the current uncertain economic landscape with the rise of a new covid variant, we do not anticipate a change to the current income tax rates or bands, in one direction or the other. Particularly as from April 2022, all UK taxpayers and businesses will see their National Insurance Contributions increase to an additional 1.25%, and which will be stay at this higher rate into 2023 when it is renamed the Health and Social Care Levy.
Remember also that The UK Government froze income tax bands in the Autumn Budget 2021, so the personal allowance threshold - or the amount of income we earn as taxpayers tax free each year - will not increase, as we have experience previously year on year. o by making no changes at all to income tax rates and bands, assuming inflation and increase in wages continues, the Scottish Government will collect more in income tax anyway.
So what policy or spending news are we likely to see?
We expect the Scottish Budget to focus on its plans for spending versus tax cuts or hikes for the next tax year, particularly as businesses and individuals may need additional support if the latest COVID variant, Omicron, causes economic disruption into the first half of 2022.
The Scottish Government are receiving an additional £4.6bn per annum from the Barnett formula to fund future spending.
There are calls for Forbes to support the high street businesses, retail and hospitality, who are very concerned on restrictions in the run up to Christmas. And of course, now that the SNP and the Greens are in a coalition, we should expect to see the start of some policy changes to support the climate change agenda.
