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The 2022-23 Scottish Budget is the first to be shaped by the SNP in collaboration with the Scottish Green Party.

How the 2022-23 Scottish Budget affects your business

Below is an overview of the taxation and spending plans relevant to small business owners and entrepreneurs.

You can read further details about The Scottish Government’s proposed spending and tax plans for 2022 to 2023 here.

Income tax rates frozen for 2022-23

Income tax rates are unchanged but the Scottish Government plans to increase the starter and basic rate income tax thresholds – in line with inflation. However, the middle, higher and top rate thresholds will be frozen.

Proposed Income Tax Rates and Bands for 2022-23

Band Income Threshold Tax Rate
Starter Rate Over £12,570 - £14,732 19%
Basic Rate Over £14,732 - £25,688 20%
Intermediate Rate Over £25,688 - £43,662 21%
Higher Rate Over £43,662 - £150,000* 41%
Top Rate Over £150,000* 46%

*The above assumes the individual is 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.

50% business rates relief for Q1 2022-23

The Finance Secretary advised that “rates relief for retail, hospitality and leisure businesses will continue until March 2022”.

These sectors will continue to receive rates relief at 50% for the first three months of the 2022-23 financial year, capped at £27,500 per ratepayer. Forbes says this move will “prevent a cliff edge for businesses”, saving them a combined £56m next year.

The Small Business Bonus Scheme will continue in 2022-23.

The Finance Secretary also committed to offering the “lowest non-domestic rates poundage in the UK”, set at 49.8p. This equates to a below-inflation uplift for a fourth successive year.

Non-Domestic Rates Basic Property Rate (Poundage) 

  • Basic Property Rate (‘Poundage’) - 49.8p
  • Intermediate Property Rate (rateable values between £51,001 and £95,000)  - 51.1p (Poundage +1.3p)
  • Higher Property Rate (rateable value above £95,000)  - 52.4p (Poundage +2.6p)

Land and Buildings Transaction Tax also maintained at existing levels

The Scottish Government’s announced no changes to residential and non-residential LBTT rates and bands. Nothing was said regards the UK Government consultation on changes to the SDLT treatment of ‘mixed property’ and availability of multiple dwellings relief. If the UK Government makes significant changes in these areas, it is likely the Scottish Government will review and possibly make changes in respect of Scottish LBTT. 

Residential LBTT rates

Band Property Value Tax Rate
Nil rate band Not more than £145,000 0%
First tax band More than £145,000 but not more than £250,000 2%
Second tax band More than £250,000 but not more than £325,000 5%
Third tax band More than £325,000 but not more than £750,000 10%
Fourth tax band More than £750,000 12%

First-Time Buyer Relief is still active, which effectively increases the Nil rate band to £175,000 for those looking to get on the property ladder for the first time.

The Additional Dwelling Supplement is also active in 2022-23, affecting buy-to-let landlords. This is a 4% additional supplement paid on the acquisition of additional residential properties in Scotland with a minimum value of £40,000.

Non-Residential LBTT rates

Band Property Value Tax Rate
Nil rate band Up to £150,000 0%
First tax band Above £150,000 to £250,000 1%
Second tax band Above £250,000 5%

Date published 9 Dec 2021 | Last updated 10 Dec 2021

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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