Scottish budget a balancing act between policy priorities and protecting revenues

Today’s Scottish draft budget highlights the tricky challenge of investing in public services while seeking to maintain a competitive tax base, the body representing the country’s tax professionals has said.

Commenting on the draft budget, Moira Kelly, Chair of the CIOT Scotland Technical Committee said:

“For all of the substantive new powers over taxation devolved to the Scottish Parliament, this was a ‘safety first’ draft budget with only the most tentative signs of divergence between Scotland and the rest of the UK.

“It is a position which neatly illustrates the tricky challenge faced by the Scottish Government in balancing responsibility for tax-raising powers and investing in public services while seeking to protect the country’s revenue base.

“Put simply, if they tax high earners or business too much then they risk the chance that some of them will base their location decisions around tax implications.  Conversely, if they seek to undercut the rest of the UK to attract more of them in there are large dead weight costs and no guarantee the gambit will come off.

“Nevertheless, the Finance Secretary has today confirmed that there are important changes underway in the tax dynamic between Scotland and the rest of the UK that businesses, individuals and tax professionals will need to prepare for in advance of next April.

“In particular, the decision to restrict increases in the rate at which people start paying the higher rate of income tax to inflation only, is likely to represent the first noticeable sign of disparity between the amount of tax paid by workers in Scotland and the rest of the UK.  This change is likely to have implications for HMRC’s ongoing work identifying Scottish taxpayers and ensuring that they are aware of (and comply) with their new tax obligations.

“Tax devolution is complicated and taxpayers and businesses – including those headquartered elsewhere in the UK with Scottish based employees –  will need to know what this means for them.

“So as Parliament debates these proposals over the coming months, it must also commit to ensuring that it improves awareness among the general public of the Scottish Government’s tax proposals, their interactions and divergences with the wider UK tax system and boosts understanding of those aspects of taxation that the Scottish and UK governments have responsibility for.”


1.       From April 2017, the Scottish Parliament will assume responsibility for further powers over income tax, enabling it to determine the rates and thresholds for income tax on non-savings and non-dividend income.  It will not have control over the tax-free personal allowance, which remains reserved to the UK Government or other aspects of income tax such as reliefs, deductions or what counts as taxable income.


2.       Further powers over Air Passenger Duty and Aggregates Levy are also to be devolved through the 2016 Scotland Act.  In addition, the Scottish Parliament will be assigned half of the share of VAT receipts collected in Scotland.


3.       From April 2016, the Scottish Parliament has had the power to set a Scottish Rate of Income Tax; it set the rate equivalent to 10p in the pound across the basic, higher and additional rates, meaning income tax rates are the same in 2016/17 for Scottish taxpayers as for those in the rest of the UK

4.       From 2015, the Scottish Parliament has had control over the design and setting of taxes on land and property (Land and Buildings Transaction Tax) and landfill tax (Scottish Landfill Tax).  These powers were devolved through the 2012 Scotland Act (The taxes were enacted by Acts of the Scottish Parliament – Land and Buildings Transaction Tax (Scotland) Act 2013 and Landfill Tax (Scotland) Act 2014 and the Revenue Scotland and Tax Powers Act 2014.)

5.       Powers over Council Tax and Business Rates have been devolved to the Scottish Parliament since 1999.


6.       The Chartered Institute of Taxation (CIOT)


The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.

The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.

The CIOT’s 18,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.

Contact: Chris Young, External Relations Officer, 07900 241 584