This week, Nicola Sturgeon outlined the SNP’s programme for Government for the year ahead. It promises to be an interesting year with a draft budget, Scottish Fiscal Commission Bill, Scotland 2015 Act and a Scottish Election.
However, as far as Scottish income tax is concerned, it is unlikely that there will be any major changes in Scotland until the assent of the Scotland 2015 Act which would allow the Government additional powers over income tax including full control over setting different rates and thresholds as set out under the Smith Commission proposals. As present, the 2012 Scotland Act offers limited flexibility because any rates changed must be applied equally to all tax bands.
Therefore, at present, any proposed changes to the basic rate of tax, say a reduction of 5 per cent, would mean that the higher and additional tax rates would also have to fall by 5 per cent. Clearly, this is not something the present Government would propose. Under pending proposals contained in the 2015 Scotland Bill, a reduction of 5 per cent on the basic rate and increases to the higher and additional rates would be possible.
Once the Scotland 2015 Act is in place we will then likely see the SNP’s election manifesto. On the back of the Scottish Fiscal Commission Bill, which will include a forecast of receipts from devolved taxes, we will probably only then know what the Government’s tax proposals will be and from when they will be applied. With the elections in May 2016 we might expect to hear more at the beginning of next year.
Please contact your usual RSM adviser to discuss further.