Scottish draft budget 2016/17 - PwC in Scotland comments on SRIT and future tax reform

Published at 17:59 PM on 16 December 2015

Commenting on the Scottish Draft Budget 2016/17, David Glen, head of Tax, PwC in Scotland, said: 

“As anticipated, John Swinney confirmed no change to the Scottish Rate of Income Tax (SRIT), with the rate continuing to mirror UK levels for another year as he seeks to protect those on low incomes across Scotland.

"But it's likely that this will only be a one year reprieve -when the long awaited fiscal framework agreement is reached, we are likely to see both rates and bands diverge from the rest of the UK from April 2017 giving a more progressive outcome. Expect to learn more about what this will entail before the dissolution of Scottish Parliament in March next year.

"The Scottish finance minister did, however, have one rabbit in his hat - and this was firmly targeted at second home owners. From 1 April 2016, anyone purchasing an additional property valued at over £40,000 will be hit with a further 3% premium on the total purchase price on top of the existing Land and Building Transaction Tax due.

"Large businesses were also targeted, with an increase in the large business supplement on non-domestic rates and imminent changes to other reliefs that will raise around £130m - but more detail is needed so firms can better understand how this will impact them going forward. Conversely, small businesses found themselves under Swinney's wing, with news that the small business bonus scheme would be retained alongside a review of business rates, which they have been calling for for quite some time.

"Many anticipated to hear more about greater local taxation changes following the release of the report form the Commission on Local Tax Reform earlier this week, a move that could have a wide impact on individuals and households.

"While there was a lack of detail in today's budget, there was plenty of emphasis on future reform, with the report raising possibilities including replacing council tax with a much more progressive property tax, and linking local government revenues to income tax receipts. We will need to wait until the New Year to discover what this actually entails – and in this regards, it would seem that perhaps the biggest impact on local government, households and business from today's landmark Draft Budget is yet to come.

"As the parties prepare for a season of electioneering in Spring, we can be sure of one thing, whatever the outcome, - tax policy will be at the heart of many manifestos as parties seek to show how they will use the new powers in future years."




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