Ahead of his Scottish Budget 2023-24 statement, Mr Swinney acknowledged the “sustained economic pressure” on public finances.
Despite an SNP manifesto pledge to freeze income tax rates for the duration of this Parliament, rates for higher earners are set to rise.
How the 2023-24 Scottish Budget affects your business
Below is an overview of the taxation and spending plans relevant to small business owners and entrepreneurs.
You can also find further details about the Scottish Government’s proposed tax and spending plans for 2023-24 here.
Starter, basic and higher rate tax bands frozen
The Scottish Government has opted to freeze the thresholds for the starter, basic and higher rate income tax bands at their 2022-23 levels.
Top rate tax band lowered
From April 2023, the top rate tax band will be lowered from £150,000 to £125,140. This follows a similar move made by the Chancellor of the Exchequer Jeremy Hunt in his Autumn Statement announcement. This means taxpayers will pay income tax at the top rate from April 2023, once their income goes above £125,140.
Higher and top income tax rates rise
Mr Swinney announced the Scottish Government will be increasing the higher and top rates of income tax by 1p respectively. The higher rate will therefore increase to 42% and the top rate will increase to 47%.
The proposed changes to the income tax rates and bands for 2023-24 are as follows:
|Band||Income Threshold||Tax Rate|
|Starter Rate||£12,571 - £14,732||19%|
|Basic Rate||£14,733 - £25,688||20%|
|Intermediate Rate||£25,689 - £43,662||21%|
|Higher Rate||£43,663 - £125,140*||42%|
|Top Rate||Over £125,141*||47%|
*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.
Land and Buildings Transaction Tax (LBTT) on second homes rises
The Scottish Government has confirmed there will be no alterations to LBTT main residential and non-residential rates and bands.
However, the Additional Dwelling Supplement – paid on the purchase of additional residential properties in Scotland with a minimum value of £40,000 – has been uplifted from 4% to 6%. This will directly impact landlords with growing portfolios.
The First‑Time Buyer Relief will continue to be available. This has the effect of increasing the nil rate band from £145,000 to £175,000 for first‑time buyers.
Business rates frozen
The poundage of non-domestic rates has been a major talking point among small businesses in Scotland hit hard by rising operating costs.
The Scottish Government has opted to freeze the basic property rate at 2022-23 levels (49.8p), which Swinney says will “protect businesses from the full impact of inflation”.
Small Business Bonus Scheme
The Scottish Government has also pledged to “reform and extend” the Small Business Bonus Scheme, ensuring the “progressivity” of the relief.
Date published 15 Dec 2022 | Last updated 15 Dec 2022This 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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