Fiscal framework outturn report: 2025

2. Tax – Overview of tax revenues, BGA and net Budget position

16. This section provides an overview of the latest information (outturn or forecast) available regarding revenues and BGAs for Income Tax and the fully devolved taxes – LBTT and SLfT.

17. Table 2 includes outturn data for 2023-24 Scottish Income Tax and fully devolved taxes, and for 2024-25 for fully devolved taxes. Scottish tax outturn data is provided by HMRC for Income Tax and by Revenue Scotland for LBTT and SLfT. Outturn data required to calculate the outturn tax BGAs is provided by HMRC. Revenue Scotland will publish their Annual Report in October. The Annual Report will contain final outturn for 2024-25 LBTT and SLfT. Therefore, final outturn is not available for inclusion at the time of writing. Revenue Scotland have provided provisional outturn based on the latest data.

Note 1: The outturn listed for 2023-24 is final outturn. Note 2: 2024-25 LBTT and SLfT provisional revenue outturn excludes penalties and accounting adjustments applied by Revenue Scotland Note 3: 2023-24 LBTT and SLfT outturn BGAs have been updated to reflect ONS’ and NRS’ publication of mid-2023 population estimates. † Indicates outturn; Figures in this and subsequent tables may not sum due to rounding

18. Table 2 also shows the most recent tax forecasts. Revenue forecasts are taken from the SFC’s Scotland’s Economic and Fiscal Forecasts, published on 25 June 2025^[5]. BGAs are based on forecasts of equivalent UK Government tax revenue prepared by the OBR for the UK Spring Statement published on 26 March 2025. Comparing the forecasts to the BGAs produces the net effect on the Scottish Budget.

19. The forecasts for Income Tax revenues and BGAs for 2024-25 and 2025-26 above do not have any immediate impact on the Scottish Budget, as they do not represent outturn data that will be used as the basis for reconciliations. Income Tax outturn data for 2024-25 and 2025-26 will be available in the summer of 2026 and 2027, respectively. The Income Tax forecasts for the years 2024-25 onwards do not yet reflect the latest 2023-24 outturn data and updated forecasts will be produced by the SFC alongside the Scottish Budget 2026-27 and inform budget decisions.

Taxes yet to be introduced

20. Some tax powers devolved in the Scotland Act 2016 are yet to be implemented: these relate to the introduction of devolved replacements for Air Passenger Duty and the Aggregates Levy.

Air Passenger Duty: Introduction of the Air Departure Tax (ADT), the replacement tax for Air Passenger Duty in Scotland, has been deferred to allow issues concerning the Highlands and Islands exemption to be resolved. The Scottish Government is actively working with the UK Government to implement Air Departure Tax in a way that protects Highlands and Islands connectivity while complying with the UK Government’s subsidy control regime.

The Scottish Government recognises the critical role air connectivity plays in the lives of residents and communities in the Highlands and Islands, and in the promotion of sustainable economic growth across the region. The high-level principles of Air Departure Tax that will guide further policy development were published alongside the Medium-term Financial Strategy on 25 June 2025.

Aggregates Levy - The Aggregates Tax and Devolved Taxes Administration (Scotland) Act 2024 received Royal Assent on 12 November 2024.

The Act sets out key arrangements for a devolved tax on the commercial exploitation of primary aggregates (crushed rock, sand and gravel) in Scotland.

Subject to the successful introduction of secondary legislation, and formal agreement with the UK Government, the Scottish Government intends that Scottish Aggregates Tax (SAT) will be introduced on 1 April 2026. In order for SAT to be introduced on that day, the provisions of the Scotland Act 2016 which disapply the existing UKAL regime in Scotland will also need to be brought into force by regulations laid by His Majesty’s Treasury in the UK Parliament. Other UK legislation may also be necessary.

Scottish and UK Ministers have now agreed an approach to set the BGA baseline for SAT. This differs from the usual approach of using outturn from the year prior to devolution, as outturn data disaggregated at a country level is not available in the year prior to devolution. The Cabinet Secretary for Finance and Local Government wrote to the Finance and Public Administration Committee on 07 August^[6] to set out the details of the agreed baseline approach. Officials will calculate and agree the SAT BGA following the next UK Autumn fiscal event.

Assignment of revenue

Assigned VAT - The 2016 Fiscal Framework agreed that VAT assignment will be implemented following agreement between the two governments on a suitable assignment methodology. It was agreed that the assignment of VAT will be based on a methodology that will estimate expenditure in Scotland on goods and services that are liable for VAT.

To avoid any delays in the agreement on the revised Fiscal Framework, it was jointly agreed by the Scottish and UK Governments that the next steps around VAT Assignment would be discussed at a future meeting of the Joint Exchequer Committee. Scottish Government and Treasury officials are working together to progress the matter.

Despite collaborative engagement between the Scottish and UK Governments, concerns remain around the substantial uncertainty and volatility associated with the proposed assignment methodology. It poses significant risks to the Scottish Budget without conferring any further fiscal or policy powers to help manage this. Similar concerns were raised by stakeholders at an evidence session held by the Finance and Public Administration Committee, and these views have been shared with the UK Government.

The Scottish Government remains committed to fulfilling Smith recommendations but must also protect the Scottish Budget from unnecessary levels of risk.

21. Information relating to Air Passenger Duty Tax, Aggregates Levy and Assigned VAT will be included in future Outturn Reports, following their implementation.