Income tax outturn reconciliation 2019-20 - joint statement with HM Treasury

A joint statement from the Scottish Government and HM Treasury setting out the income tax reconciliation process and detailing the provisional 2019-20 income tax reconciliation.

This statement, jointly agreed by HM Treasury and the Scottish Government, shows both governments’ continued ambition to ensure full transparency in, and to improve wider understanding of, the Fiscal Framework and specifically the reconciliation process. This is in line with recommendations by stakeholders, including those given by the Scottish Parliament’s previous Finance and Constitution Committee. [1]

Reconciliation for 2019-20 income tax

Today, HMRC published provisional Income Tax outturn statistics for the tax year 2019-20 [2].

The figures in this publication provide an indication of both the Scottish Government’s Income Tax revenues, and the equivalent Income Tax revenues for the rest of UK that are used to calculate the Scottish Government’s Income Tax Block Grant Adjustment, as set out in the Fiscal Framework agreed between the Scottish and UK Governments. This allows the provisional Income Tax reconciliation applying to the 2022-23 Scottish Government budget to be calculated.

Although these statistics meet the usual standard of Official Statistics, they will not be formally signed off until the National Audit Office (NAO) has completed their annual audit of the HMRC Trust Statement. This is expected to be completed by October 2021 which is when the final adjustments to the Scottish Government’s block grant will be confirmed.

Calculating the reconciliation requires comparing the forecast and outturn figures for the Scottish Government’s Income Tax revenues and for the Block Grant Adjustment. The difference between the forecasts and the outturns is applied to the Scottish Government’s funding in 2022-23. Further background is set out below, after the calculations.

The two reconciliation components will have the following effects, as summarised in the table below:

  • Block Grant Adjustment: The provisional outturn is higher than was forecast at the time of the 2019-20 Scottish Budget so this will increase the Block Grant Adjustment (and by implication reduce the Scottish Government’s block grant) by £184m in 2022-23
  • Scottish Income Tax: The provisional outturn is higher than was forecast at the time of the 2019-20 Scottish Budget so this will increase Scottish Government self-funding by £149m in 2022-23

The provisional net reconciliation effect is a £34m reduction in the Scottish Government’s funding for 2022-23.

Provisional Reconciliation for 2019-20 income tax which will impact the 2022-23 budget

2019-20 Income Tax (£m)


Block Grant Adjustment

Net Budget Position


Forecasts as of Scottish Government Budget 2019-20















Note – numbers may not sum due to rounding.


The Scotland Act 2016 devolved additional tax powers to the Scottish Government. In April 2017, the Scottish Government gained the power to set the rates and bands for non-savings and non-dividends (NSND) Income Tax in Scotland, however, HMRC is still responsible for the collection of Scottish Income Tax.

The Scottish Government is partly funded by the UK government block grant, and partly self-funded through raising revenue from devolved taxes and borrowing.

The block grant is determined by the longstanding Barnett Formula.

The block grant is now adjusted to reflect the impact of the transfer of greater fiscal powers to the Scottish Government. These Block Grant Adjustments (BGAs) are deductions for tax powers and additions for social security benefits. Alongside this, the Scottish Government retains all revenues from devolved taxes, has a Scotland Reserve and has capital and resource borrowing powers with agreed limits.

For resource borrowing, the Scottish Government has the power to borrow for the following reasons:

  • for in-year cash management, with an annual limit of £500m
  • for forecast error in relation to devolved and assigned taxes and demand-led welfare expenditure arising from forecasts of Scottish receipts/expenditure and corresponding UK forecasts for the Block Grant Adjustments, with an annual limit of £300m; and
  • for any observed or forecast shortfall in devolved or assigned tax receipts or demand-led welfare expenditure incurred where there is, or is forecast to be, a Scotland-specific economic shock, with an annual limit of £600m

As a result of a Scotland-specific economic shock being triggered in 2021-22, largely driven by timing differences between the respective SFC and OBR forecasts, the Scottish Government will have the power to borrow up to £600m for a shortfall in tax receipts or increase in demand-led welfare expenditure between 2021-22 and 2023-24.

Initially, the Scottish Government’s Income Tax revenues are forecast by the Scottish Fiscal Commission (SFC) and the Income Tax BGA is based on Office for Budget Responsibility (OBR) Income Tax forecasts for the rest of the UK. Once the forecast revenue is determined and the corresponding BGA is made, there are no changes in the Scottish Government’s funding until outturn data is available.

As set out in the Scottish Government’s Fiscal Framework, Income Tax outturn published in HMRC’s Annual Report and Accounts, which is normally published around 16 months after the end of the financial year, will then be used to determine the Scottish Government’s funding for the following financial year through a reconciliation process.

Under this process, a reconciliation for 2019-20 Income Tax will be applied to the 2022-23 Scottish Budget. The reconciliation covers both Income Tax revenues and the BGA.

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