Scottish Budget 2020-2021

Sets out our proposed spending and tax plans for 2020 to 2021, as presented to the Scottish Parliament.

This document is part of a collection

Chapter 2: Tax


Since 2007 the Scottish Government has demonstrated an approach to taxation that is fair, progressive and promotes sustainable economic growth. Around 40 per cent of the Scottish Budget 2020‑21 is funded from revenue raising powers devolved to the Scottish Parliament. The Scottish Government works closely with Revenue Scotland[1] on the policy and legislative development of fully devolved taxes, and with HM Revenue and Customs (HMRC) in exercising its powers in relation to the partially devolved taxes.

The Fiscal Framework agreed between the UK and Scottish Governments determines how the Scottish Government's block grant will be adjusted to take account of the devolved and partially devolved taxes set by the Scottish Government.

Taxes both fund public services and allow the Scottish Government to support business and encourage growth through economic development, skills investment and major infrastructure projects.

Adam Smith's four key maxims remain core to Scottish Government policy thinking on tax and have informed decisions in this budget. These are that taxation should be:

  • proportionate to the ability to pay;
  • certain for the taxpayer;
  • convenient and easy to pay; and
  • efficient.

Another cornerstone of the Scottish Government's approach to taxation is engagement with our people, communities and businesses.[2]

The Scottish Government has sought to use what responsibility it has on taxation to ensure it raises revenue in a fair and proportionate way.

Scottish Income Tax

The Scotland Act 2016 conferred on the Scottish Parliament the power to set all income tax rates and bands for the non‑savings non‑dividend (NSND) income of Scottish taxpayers. The Scottish Government receives all NSND revenue raised from Scottish taxpayers. However, income tax remains a partially devolved tax. The responsibility for defining the income tax base, which includes the setting or changing of income tax reliefs and exemptions, including the Personal Allowance, remains with the UK Government. Income tax on savings and dividends continues to be paid to the UK Government at rates and bands set by HM Treasury. HMRC is responsible for the collection and management of Scottish Income Tax.


Significant changes to Scottish Income Tax were implemented in the Scottish Budget 2018‑19, delivering a more progressive system, with the introduction of two new bands and a change to some existing rates. A commitment was made by the Cabinet Secretary for Finance, Economy and Fair Work that the new five-band structure should be seen as settled for the remainder of this parliament. As such, this budget makes no changes to rates, and does not introduce or remove any bands. The Scottish Government's income tax policy is developed on the basis of four key tests, as set out in our income tax discussion paper, published in 2017.[3] These continue to underpin the policy decisions proposed in this year's budget.

Rates and Bands

In the 2018 Autumn Budget, the UK Government announced that the UK‑wide Personal Allowance would be frozen at £12,500 in 2020‑21. This policy announcement has formed the basis of the Scottish Fiscal Commission (SFC) assumptions and forecasts for income tax revenue, in line with the approach taken by the Office for Budget Responsibility (OBR). We expect this to be confirmed by the UK Government in their Budget on 11 March 2020. Table 2.01 sets out the Scottish Government's proposed rates and bands for 2020‑21.

Table 2.01: Scottish Income Tax Policy Proposals 202021

Band Band name Rate
£12,501* ‑ £14,585 Starter Rate 19%
£14,586 ‑ £25,158 Scottish Basic Rate 20%
£25,159 ‑ £43,430 Intermediate Rate 21%
£43,431 ‑ £150,000** Higher Rate 41%
Above £150,000** Top Rate 46%

*Assumes individuals are in receipt of the Standard UK Personal Allowance.
**Those earning more than £100,000 will see their Personal Allowance reduced by £1 for every £2 earned over £100,000.

The Scottish Government continues to take an approach that ensures lower‑ and middle‑earning taxpayers do not see their taxes rise. This has been delivered for 2020‑21 through an inflationary increase in the Basic and Intermediate Rate thresholds and no changes to the rates of tax. To deliver on our commitment to progressivity and to raise additional revenue to invest in vital public services and the Scottish economy, the Higher Rate Threshold will be frozen at £43,430 and the Top Rate Threshold will be frozen at £150,000. We have assumed that, in the UK Budget on 11 March, the UK Government will freeze the Higher Rate Threshold in the rest of the UK in cash terms at £50,000. This was the policy intention announced in the 2018 Autumn Budget. Based on this intention, there should be no further divergence in income tax between Scotland and the rest of the UK this year.

As a result of our income tax policy decisions taken since 2018‑19, and our assumptions about the UK Budget on 11 March, 56 per cent of Scottish income taxpayers will pay less tax than people earning the same in the rest of the UK in 2020‑21. Moreover, on current incomes, no Scottish taxpayer will pay more income tax than they did last year. For more information on the policy proposals and what they mean for you, see our two‑page fact sheet, published on the Scottish Government's website on 6 February 2020.

In developing income tax policy, the Scottish Government has consistently taken a responsible approach to balancing increased progressivity and raising revenue, alongside ensuring tax policy does not negatively impact economic growth or competitiveness. We continue to monitor these risks closely, which is why the Council of Economic Advisers (CEA) were asked to extend their remit to consider the behavioural effects and risks of all income tax policy. A paper summarising the analysis presented to the CEA will be published on the Scottish Government's website on 6 February 2020.

Scottish Rate Resolution

The Scottish Government will introduce a Scottish Rate Resolution to set the rates and bands for Scottish Income Tax for the 2020‑21 tax year. A draft of this motion and an accompanying explanatory note will be published on the Scottish Government's website on 6 February 2020.


The SFC's forecasts for Scottish Income Tax receipts in 2020‑21 determine the revenue that the Scottish Government will be able to draw down from HM Treasury during the year ahead. Forecasts for income tax receipts are set out in Table 2.02. This shows that over £12 billion is forecast to be raised in 2020‑21. This will help the Scottish Government to deliver on our strategic priorities, offering the widest range of free‑to‑access public services in the UK and meeting our ambitious targets on child poverty through initiatives such as the Scottish Child Payment (SCP). The SCP will be introduced initially for low-income families with children under six, with the first payments made by Christmas 2020.

Table 2.02: Scottish Income Tax Revenue Forecasts

£ million 2018‑19 2019‑20 2020‑21 2021‑22 2022‑23 2023‑24 2024‑25
Income Tax Revenue Forecasts 11,378 11,677 12,365 12,897 13,447 14,059 14,722

The SFC's forecasts for the years 2021‑22 to 2024‑25 are based on the assumption of an inflationary uplift to all thresholds except the Top Rate Threshold, and no further changes to tax rates for the remainder of the forecast period. From 2021‑22, the SFC assumes an inflationary uprating of the UK‑wide Personal Allowance.

The SFC forecast that the Scottish Government's income tax policies announced in this budget will raise an additional £51 million in 2020‑21, when compared to a scenario where all thresholds, except the Top Rate Threshold, increase in line with inflation (Table 2.03).

Table 2.03: Forecast of Additional Revenue from Scottish Government Policy

£ million 2020‑21 2021‑22 2022‑23 2023‑24 2024‑25
Income Tax Revenue Forecasts 51 54 56 59 63

Land and Buildings Transaction Tax

Land and Buildings Transaction Tax (LBTT) replaced UK Stamp Duty Land Tax (SDLT) in Scotland from 1 April 2015. LBTT is a tax applied to residential and non‑residential land and buildings transactions (including commercial leases) where a chargeable interest is acquired. The Additional Dwelling Supplement (ADS) was introduced from 1 April 2016 and is payable, in addition to LBTT, on purchases of all relevant residential properties above £40,000.


The Scottish Government's policy priority for residential LBTT remains to help first‑time buyers and to assist people as they progress through the property market. In line with this, the Scottish Government will maintain residential LBTT rates and bands at their current level.

The ADS rate will also stay at 4 per cent and no policy changes are planned at this time. However, following the Scottish Parliament's Finance and Constitution Committee's consideration in 2019, the Scottish Government is undertaking work to consider the range of views in relation to the operation of the ADS.

Existing non‑residential LBTT rates and bands for conveyances will remain unchanged. However, the Scottish Government will introduce a new 2 per cent band for non‑residential leases, applying to transactions where the net present value (NPV) of rental income over the period of the lease is above £2 million. Legislation will be introduced to the Scottish Parliament to enable this change to come into effect from 7 February 2020, but it will not apply if the contract for a transaction was entered into prior to 6 February 2020. In addition, the change will not apply to any further returns made in connection with the three‑year review, assignation or termination of a lease where the effective date is between 1 April 2015 and 6 February 2020. More detailed guidance on this will be provided on the Revenue Scotland website.

At the Scottish Budget 2019-20, the Scottish Government undertook to introduce two targeted LBTT reliefs following further consultation, to help safeguard investment in Scottish real estate and increase the attractiveness of Scotland as an investment destination. These were: a relief for the 'seeding' (initial transfer) of properties into a Property Authorised Investment Fund (PAIF) or Co‑owned Authorised Contractual Scheme (CoACS); and a relief for when units in CoACS are exchanged. Legislation to provide for these two reliefs was not brought forward in 2019-20 due to continued uncertainty around the terms of the UK's exit from the EU. The Scottish Government now plans to publish a consultation on draft legislation in 2020-21.

Rates and Bands

Taking account of the proposed addition of a new 2 per cent band for non‑residential leases where the net present value (NPV) of rental income is above £2 million, rates and bands for residential and non‑residential transactions are set out in Table 2.04 below.

Table 2.04: LBTT Rates and Bands for Residential and Nonresidential Conveyances and Leases

Residential conveyances Non‑residential conveyances Non‑residential leases
Purchase price LBTT rate Purchase price LBTT rate Net present value of rent payable LBTT rate
Up to £145,000 0% Up to £150,000 0% Up to £150,000 0%
£145,001 to £250,000* 2% £150,001 to £250,000 1% £150,001 to £2 million 1%
£250,001 to £325,000 5% Over £250,000 5% Over £2 million** 2%**
£325,001 to £750,000 10%
Over £750,000 12%

* First‑time buyers are entitled to LBTT relief up to £175,000.
** From 7 February 2020.

An ADS rate of 4 per cent applies to the total price of the property for all relevant residential transactions above £40,000, in addition to the rates set out in Table 2.04.


The SFC's forecast tax revenues for residential LBTT, ADS, and non‑residential LBTT for the period 2019‑20 to 2024‑25 are set out in Table 2.05.

Table 2.05: LBTT Revenue Forecasts 201920 to 202425

£ million 2019‑20 2020‑21 2021‑22 2022‑23 2023‑24 2024‑25
Land and Buildings Transaction Tax 613 641 666 692 720 749
of which:
Residential transactions (excl. ADS) 288 303 319 336 354 371
Additional Dwelling Supplement (ADS) 134 129 131 134 137 140
Non‑residential transactions 191 209 216 222 230 238

Note: Figures may not sum due to rounding.

The SFC forecast that the Scottish Government non‑residential lease policy will raise an additional £10 million in 2020‑21 and £11 million per annum thereafter. It is also forecast to raise an additional £2 million in 2019‑20, due to its introduction in the 2019‑20 tax year (Table 2.06).

Table 2.06: Impact of the Measure to Increase LBTT Rates from 1% to 2% on some Nonresidential Leases*

£ million 2019‑20 2020‑21 2021‑22 2022‑23 2023‑24 2024‑25
Policy forecast (£m) 2 10 11 11 11 11

*Where the NPV of rental income over the period of the lease is above £2m.

Scottish Landfill Tax

Scottish Landfill Tax (SLfT) was introduced on 1 April 2015, replacing UK Landfill Tax. It is a tax on the disposal of waste to landfill, charged by weight on the basis of two rates: a standard rate, and a lower rate for less-polluting materials.


The rates set for SLfT are intended to serve as a financial incentive to support a more circular economy, and the delivery of our ambitious targets to reduce waste, increase recycling and cut waste going to landfill.

Landfill operators are able to voluntarily contribute a capped proportion of their landfill tax liability to the Scottish Landfill Communities Fund (SLCF), and claim 90 per cent of the contribution as a tax credit. In order to claim a credit, the funds must be used for one or more of the objectives set out for the SLCF.

Looking further ahead, the Cabinet Secretary for Environment, Climate Change and Land Reform announced in September 2019 that full enforcement of the ban on the landfilling of biodegradable municipal waste (BMW) should be delayed until 2025 for both local authorities and commercial operators managing waste covered by the ban. Work is currently underway to explore the role that SLfT could play during this transitional period and a further announcement will be made in 2020-21. Whilst a transitional period has been agreed, the Scottish Government remains committed to ending the practice of sending BMW to landfill, in order to contribute to climate change targets and ensure Scotland's waste is managed in a sustainable way.

Rates and Bands

The Scottish Government proposes to increase both the standard rate of SLfT to £94.15 per tonne and the lower rate of SLfT to £3 per tonne in 2020‑21 to ensure consistency with planned Landfill Tax charges in the rest of the UK. This will continue to provide a stable tax environment for industry to invest in alternative waste treatment options, whilst addressing concerns over potential 'waste tourism' should one part of the UK have a lower tax charge than another.

The credit rate for the SLCF for 2020-21 will remain at a maximum of 5.6 per cent of an operator's tax liability. This will ensure that landfill site operators can continue to contribute to community and environmental projects near landfill sites to a greater degree than their UK counterparts, without any increase in the overall tax burden.


The SFC's forecast tax revenue for SLfT in the period 2019‑20 to 2024‑25 is set out in Table 2.07.

Table 2.07: SLfT Revenue Forecasts 201920 to 202425, adjusted for payments to the Scottish Landfill Communities Fund

£ million 2019‑20 2020‑21 2021‑22 2022‑23 2023‑24 2024‑25
Scottish Landfill Tax 124 116 110 94 79 66

The forecast includes the change in policy on the landfilling of BMW and the degree to which local authorities and commercial operators are expected to make progress towards the new deadline for the implementation of the BMW landfill ban.

NonDomestic Rates


Non‑domestic rates (NDR), often described as business rates, are a local tax levied on lands and heritages used for non‑domestic purposes in the public, private and third sectors. NDR are administered and collected by local authorities, who retain all the NDR revenue they raise to help fund the local services they provide. The NDR poundage is set nationally and annually by the Scottish Government. All comparisons made with the rest of the UK assume no further policy announcements are made in the UK Budget on 11 March 2020.

In 2020‑21, the budget maintains the UK's most competitive rates regime. This includes the lowest poundage and a relief package estimated by the SFC to be worth £744 million. The Basic Property Rate ('poundage') will be 49.8 pence, which delivers a below-inflation increase for the second consecutive year.

The Budget 2020‑21 also introduces the following policies that, taken together, will ensure that at least 95 per cent of properties are liable for a lower rate than anywhere in the UK:

  • properties with a rateable value (RV) above £95,000 will continue to be charged the Higher Property Rate (formerly the poundage plus the Large Business Supplement) of 2.6p plus the poundage;
  • properties with an RV of between £51,000 and £95,000 will now only be charged an additional 1.3p on rates on top of the standard poundage. The introduction of this Intermediate Property Rate will improve the progressivity of the system and reduce rates liabilities for around 9,500 medium-sized properties by 1.3p, or 3 per cent;
  • an extension of 100 per cent relief for Enterprise Areas to 31 March 2022;
  • an amendment to the reset period for Empty Property Relief from 6 weeks to 6 months, as recommended by the Barclay Review;
  • the introduction of a 70‑day requirement of actual letting for a self‑catering property in order to be considered non-domestic and liable for NDR rather than council tax, as recommended by the Barclay Review;
  • the introduction of a new 100 per cent relief for Reverse Vending Machines from 1 April 2020, which will assist retailers in the context of the Deposit Return Scheme and supporting efforts to tackle climate change; and
  • introducing a district heating relief guaranteed until 2032 in order to provide certainty to investors.

The Scottish Budget 2020‑21 also maintains:

  • the Small Business Bonus Scheme, which has lifted over 111,000 properties out of rates altogether as at 31 May 2019;
  • the Business Growth Accelerator, which is unique in the UK and ensures that new build properties are not liable for rates until 12 months after first occupation and any rates bill rises due to improvements to or the expansion of existing properties will not take effect until 12 months after those changes are made to the property;
  • Transitional Relief, which caps annual rates bill increases at 12.5 per cent in real terms for Aberdeen City and Aberdeenshire offices and all but the very largest hospitality properties across Scotland;
  • Day Nursery Relief for all standalone nurseries in the public, private and charitable sectors;
  • New Fibre Relief for all new fibre infrastructure for telecommunication;
  • relief for mobile masts in selected geographic locations; and
  • Fresh Start Relief, which offers 100 per cent relief for all reoccupied properties that have been empty for six months.

Some of these measures will be awarded under the EU State Aid de minimis regulations, which are currently assumed to continue irrespective of the terms of any future trading relationship with the European Union. Councils may also offer their own local reliefs under the Community Empowerment (Scotland) Act 2015.

The Scottish Government commissioned the independent Barclay Review of NDR to identify how the rates system could better support growth, improve the administration of the system and increase fairness for ratepayers. On 25 March 2019, the Non‑Domestic Rates (Scotland) Bill was introduced to Parliament to deliver a number of the recommendations of the Review that require primary legislation. Key provisions include:

  • three‑yearly valuations from 2022 to ensure that valuations are more closely aligned to current market values;
  • a two‑stage appeals system (proposal and appeal) to improve the administration and timeliness of the appeals system;
  • greater information‑gathering powers for assessors and a new civil penalty for non‑provision of information in order to increase 'right first‑time' valuations and improve ratepayers' trust in the rating system;
  • the power to introduce general anti‑avoidance regulations in order to improve fairness for all;
  • levelling the playing field between different sectors, such as public and private schools by removing charitable rates relief from mainstream independent schools, whilst retaining the relief for independent special schools and specialist independent music schools. This is due to commence on 1 September 2020.

Stage 3 of the Bill is scheduled for completion during the week beginning 3 February 2020. The outcome of Stage 3 was unknown prior to the preparation of this document.


The amount of tax due is based on the rateable value of the property multiplied by the poundage, minus any reliefs to which the property is entitled.

Independent Assessors set the rateable value of a property, which is equivalent to the amount of annual rent the property would attract on the open market if vacant and to let. Non‑domestic property values are regularly revalued to reflect prevailing economic circumstances. The most recent revaluation took place in 2017, with the next scheduled for 2022.

The main tax rate is the Basic Property Rate, which is a pence in the pound tax rate set by Scottish Ministers. Two additional rates are levied on properties with a rateable value over £51,000 and £95,000 respectively.

Tax rates for 2020‑21 will be as set out in Table 2.08 below.

Table 2.08: Non-Domestic Rates tax rates, 202021

Basic Property Rate ('Poundage') 49.8p
Intermediate Property Rate (rateable values between £51,000 and £95,000) 51.1p
(Poundage +1.3p)
Higher Property Rate (rateable value above £95,000) 52.4p
(Poundage +2.6p)


Forecast tax revenues for NDR for 2020‑21 are set out in Table 2.09 below.

Table 2.09: Non-Domestic Rates Revenue Forecasts 202021

£ million 2020‑21
Non‑Domestic Rates 2,749

Table 2.10 shows the SFC's estimate of revenue changes following from the policy changes presented above.

Forecasts for future years can be found in the SFC's Economic and Fiscal Forecasts February 2020. These take into account the Non‑Domestic Rates (Scotland) Bill as amended at Stage 2.

Table 2.10: Non-Domestic Rates Policy Revenue Foregone Forecasts

£ million 2020‑21
Pre‑measures forecast 2,757
Reverse Vending Machine Relief 0
Intermediate Property Rate (7)
Post‑measures forecast 2,749
Difference (7)

Source: Scottish Government, Scottish Fiscal Commission. Figures may not sum due to rounding.

Air Departure Tax

Following the commencement of section 17 of the Scotland Act 2016 on 23 May 2016, the Scottish Parliament passed the Air Departure Tax (Scotland) Act 2017 on 20 June 2017.

The Minister for Public Finance and the Digital Economy informed Parliament on 23 April 2019 that the introduction of Air Departure Tax (ADT) will be deferred beyond April 2020. The Scottish Government has been clear that a resolution to the Highlands and Islands exemption issue must be found before ADT can be introduced in Scotland, to ensure that devolved powers are not compromised. The Scottish Government will continue to work with the UK Government to ensure that future parliaments can decide on the best policy for Scotland's interests, in line with our climate ambitions. The UK Government will maintain the application of Air Passenger Duty in Scotland in the interim.

Aggregates Levy

Aggregates Levy is a tax paid on the commercial exploitation of aggregates, i.e. sand, gravel and rock. The Scotland Act 2016 gave the Scottish Parliament the power to legislate for a tax to replace the Aggregates Levy in Scotland.

In February 2019, the UK Government announced that long‑standing litigation on the UK Aggregates Levy had concluded and that a comprehensive review of the levy would be undertaken. This review is considering potential reforms to the levy, taking account of its objectives and impact, the effectiveness of the current design and the environmental and business context for aggregate production and the extraction of other construction materials.

Given the review and its potential impacts on the future of the UK levy, decisions have not yet been taken about the timeline for devolution of the levy to Scotland. The Scottish Government will continue to work with the UK Government and stakeholders in anticipation of the levy's eventual devolution.

Value Added Tax Assignment

The Scotland Act 2016 provides for the first 10 pence of the Standard Rate of Value Added Tax (VAT), and the first 2.5 pence of the Reduced Rate, to be assigned to the Scottish Government. As VAT for Scotland is not available from tax returns, assigned VAT will be based on a model of expenditure in Scotland. The draft model for calculating Scottish VAT receipts[4] has been published. Work to finalise the model continues and will be discussed through the Joint Exchequer Committee.

VAT assignment is in a transitional phase. It is forecast and calculated, but with no impact on the Scottish Government's budget. When both governments are assured that the assignment methodology is working effectively, the Scottish Government's budget will be determined by forecast and final estimated VAT receipts in Scotland and the corresponding Block Grant Adjustment. The SFC's latest forecasts for Scottish assigned VAT receipts are shown in Table 2.11.

Table 2.11: Scottish Government Assigned VAT Revenue Forecasts

£ million 2019‑20 2020‑21 2021‑22 2022‑23 2023‑24
Policy forecast 5,554 5,727 5,886 6,045 6,206

Devolved Taxes Legislation

In early 2019, the Scottish Government and the Clerks to the Scottish Parliament's Finance and Constitution Committee established the Devolved Taxes Legislation Working Group to take forward a recommendation made by the Budget Process Review Group 'to explore options for alternative legislative processes for devolved taxes legislation, particularly where tax measures need to be introduced quickly or where minor amendments are needed to existing primary legislation.'

The Working Group has today published an interim report for consultation to provide an opportunity for wider engagement on the potential options. The interim report, and information on how to respond to it, is available on the Scottish Government website.[5]

Tax Block Grant Adjustments

Changes in the Scottish Government's block grant are determined via the operation of the Barnett formula. Under the Fiscal Framework, the block grant is then reduced to reflect the tax revenues devolved to Scotland under the Scotland Acts 2012 and 2016. These reductions are referred to as Block Grant Adjustments (BGAs).

The impact on the budget is initially determined by the difference between forecasts of these BGAs and forecasts of Scottish tax revenues. When information about actual revenues and expenditure becomes available, known as 'outturn data', subsequent budgets are adjusted to account for the difference between forecast and outturn data. This ensures that the budget received ultimately reflects the outturn figures rather than forecasts. This process is known as 'reconciliation', and can involve additions or reductions to Scotland's block grant. This data becomes available for different taxes and social security benefits at different times, so reconciliations are made throughout the budget cycle. This is the first budget that includes an income tax reconciliation.

Further detail on the operation of the Fiscal Framework is set out in the Fiscal Framework Technical Note.[6]

Provisional Block Grant Adjustments

Since the UK Budget is taking place after the Scottish Budget, provisional BGAs have been used to inform the Scottish Budget 2020‑21.

The Fiscal Framework sets outs (in paragraph C.47 of Annex C) that, where the Scottish Budget takes place before the UK Budget, the Scottish Budget will be based on provisional BGAs. The Framework also sets out that, where the UK Budget takes place less than three months before the start of the financial year, these provisional BGAs will then be applied to the block grant for that year.[7]

These provisional BGAs are based on forecasts published by the OBR at UK Spring Statement 2019, which were then restated on 16 December 2019 alongside the Welsh Budget. These restated forecasts take account of the 2017‑18 outturn data as well as in‑year information from the PAYE system, but do not take into account any changes to the underlying economic outlook.

Updated BGAs will be calculated alongside the UK Budget on 11 March and these updated BGAs could be incorporated into the Scottish Budget, if the Scottish Government requests this.

Table 2.12 shows the most recent forecasts for revenues, BGAs and their net impact on the budget. For 2018‑19 and 2019‑20 these differ from the figures set out in Table 1.02, which shows the forecasts that were used to determine the budget for these years. For the years after 2020‑21 the figures represent current forecasts, but each budget will be based on updated forecasts made as part of each budget process.

Income Tax

The 2020‑21 forecast for income tax estimates a positive £46 million net effect on the Scottish Budget 2020‑21. This will be locked into the budget until a reconciliation is applied to the Scottish Budget 2023‑24 for both revenue and the BGA.

Reconciliations from 2018‑19 and 2019‑20 income tax will be applied to the Scottish Budget 2021‑22 and Scottish Budget 2022‑23 respectively. The reconciliation for 2017‑18 Scottish income tax is shown in Table 2.13.

Fully Devolved Taxes

The 2020‑21 forecasts for LBTT and SLfT estimate a positive £114 million net effect on the Scottish Budget 2020‑21. An in‑year BGA reconciliation for both taxes will take place within 2020‑21 before a final BGA reconciliation is made to the Scottish Budget 2022‑23.

The 2018‑19 LBTT and SLfT revenue and BGA figures are outturn figures and final reconciliations are shown in Table 2.13.

Table 2.12: Forecasts of Revenues and Block Grant Adjustments

£ million 2018‑19 2019‑20 2020‑21 2021‑22 2022‑23 2023‑24 2024‑25
NSND Income Tax Revenue 11,378 11,677 12,365 12,897 13,447 14,059 14,722
BGA (11,505) (11,705) (12,319) (12,742) (13,194) (13,690) N/A
Net impact on budget (127) (28) 46 155 253 369 N/A
LBTT Revenue 554 613 641 666 692 720 749
BGA (549) (527) (557) (597) (634) (685) N/A
Net impact on budget 5 86 85 69 58 36 N/A
SLfT Revenue 149 124 116 110 94 79 66
BGA (105) (97) (87) (85) (76) (64) N/A
Net impact on budget 43 27 29 25 18 15 N/A
Total Tax Revenue 12,081 12,414 13,123 13,673 14,233 14,858 15,537
BGA (12,159) (12,329) (12,963) (13,424) (13,905) (14,439) N/A
Net impact on budget (78) 85 160 249 328 419 N/A

The total tax BGA does not include the non‑tax BGAs for fines, forfeitures, fixed penalties, and proceeds of crime.
For the total BGA including tax and non‑tax elements, please refer to Table 1.02.
The BGAs shown are calculated using the Indexed Per Capita (IPC) indexation method. This method in practice determines the BGAs applied to the budget. This is set out in more detail in the Fiscal Framework Technical Note.[8]
Figures may not sum due to rounding.

Impact of Reconciliations on this Budget

A negative £207 million reconciliation has been applied to the Scottish Budget 2020‑21 relating to 2017‑18 Scottish income tax; 2018-19 LBTT and SLFT; fines, forfeitures and fixed penalties (FFFPs); and Carer's Allowance. A breakdown of these reconciliations is shown in Table 2.13.

Table 2.13: Reconciliations Applied to 202021

£ million
2017‑18 Income Tax Revenue and BGA Reconciliation (204.3)
2018‑19 LBTT BGA Reconciliation (3.3)
2018‑19 SLfT BGA Reconciliation (1.5)
2018‑19 FFFPs BGA Reconciliation 2.1
2018‑19 Carer's Allowance BGA Reconciliation (0.1)
Total Final Reconciliation To 2020‑21 Budget (207.1)

Figures may not sum due to rounding

2017‑18 Income Tax Reconciliation

In the Scottish Budget 2017‑18, income tax was forecast to have a positive net effect on Scotland's finances, with revenues exceeding the BGA by £107 million. However, the net impact was ultimately negative, with outturn revenue £97 million below BGA. This translates into a £204 million negative reconciliation requirement that will be applied to the Scottish Budget 2020‑21.

Further explanation can be found on these reconciliations in the Fiscal Framework outturn report 2019.[9]

The Scottish Government intends to use its borrowing powers under the Fiscal Framework to manage this forecast error.

1. Working together on tax. Available from

2. Devolved taxes: a policy framework, Analysis of Consultation Responses. Available from:

3. The Scottish Government (2017) "The Role of Income tax in Scotland's Budget" Available from:

4. Scottish VAT assignment - Summary of VAT assignment model:


6. Available from

7. The Fiscal Framework agreement actually refers to the Scottish Government's Draft Budget and the UK Autumn Statement, but due to changes in the budget processes of both governments, the Scottish Budget replaces the Scottish Government's Draft Budget and the UK Budget replaces the UK Autumn Statement in this situation.

8. Available from




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