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Ms Forbes described the Scottish Budget 2021 as the country’s most important since the formation of the Scottish Parliament in 1999, as it looks to support vast swathes of the Scottish economy that have been hit hard by the coronavirus crisis.

Historically, the Scottish government has opted not to announce its own budget until the UK Government has published details of its own.

However, the Scottish Government decided that it could not wait until the UK’s Budget 2021 - scheduled for Wednesday 3 March - to make public its fiscal plans for Scottish people and businesses in the coming year.

The wider economic landscape for Scotland

Ms Forbes confirmed that the Scottish economy was heading into the 2021-22 financial year 7.1% smaller than it was before the onset of the COVID-19 pandemic.

In turn, this has had a knock-on effect on the country’s GDP, which is projected to fall 5.2% in Q1 2021. As a consequence of the continued nationwide lockdown restrictions, the Government also anticipates Scotland’s unemployment rate to rise to 7.6% by the end of Q2 2021.

With the first half of 2021 almost certain to be a sluggish one for Scotland’s army of small businesses and self-employed professionals, the Finance Secretary has moved to freeze income and council tax to support “households and families”.

Income tax bands effectively frozen

The starter, basic and higher rate bands for income tax will only move by inflation, while the top rate band will be frozen in cash terms at £150,000 per annum.

100% non-domestic relief extended by three months

There will also be a three-month extension to the business rates holiday for retail, hospitality and leisure businesses, with no firm due to pay a penny for an additional three months.

Land and Buildings Transaction Tax and Additional Dwelling Supplement

The property sector will also need to prepare for the return of the lowest tax band for land and buildings transaction tax (LBTT) for domestic and commercial properties. The £145,000 threshold will commence from 1st April 2021. However, first-time buyer relief will remain for purchases worth up to £175,000.

For buy-to-let landlords with second or multiple properties, the Additional Dwelling Supplement – payable in addition to LBTT – will remain in place at 4%.

Fresh investment in Scotland’s infrastructure

The Scottish Budget 2021 also contains substantial investment in Scotland’s public health, its cities, as well as its agenda to create greener jobs and the ideal climate for tech start-ups to flourish:

  • £869m ring-fenced for the country’s overall COVID-19 response, including vaccinations and Test and Trace.
  • Strategic Business Framework Fund to be extended beyond the end of the 2020-21 financial year.
  • £230.9m to support Skills Development Scotland and the government’s “vital agenda” to level-up career prospects for the next generation.
  • The first phase of a five-year £100m Green Jobs Fund is to be launched, including the formation of the Green Jobs Workforce Academy.
  • Scotland’s digital connectivity will receive a £98m uplift, with a view to bringing 4G and 5G connectivity to all areas.
  • A £7m commitment to making Scotland a “world class hub for digital business” start-ups.
  • A further £210m invested in cities investment and strategy, continuing the government’s work with regional partners.
  • The discretionary fund for local authorities will double to £60m, allowing local government to distribute as they wish to support local needs.
  • The government’s Infrastructure Investment Plan is due to be published next week, covering a “pipeline of projects” to drive “inclusive, net-zero and sustainable growth”.
  • An additional £1.6bn will be spent on Scotland’s bus and rail services, with a further £100.5m invested in “active travel”, designed to consolidate changes to healthier, greener travel options adopted through the pandemic.
  • In total, the Scottish government’s investment in its Health and Sport portfolio will total £16bn in 2021-22 – an uplift of £800m.

If you’d like to receive our Budget Reports for the upcoming UK Budget 2021 on Wednesday 3rd March, complete our simple form and keep your finger on the pulse of the matters affecting your small business.

Last updated: 28th January 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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