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Following the recent shock resignation of  Finance Secretary Derek Mackay from his post, on 6th February 2020 the Scottish Government’s Public Finance Minister, Kate Forbes, outlined the Scottish spending plans in Holyrood in his absence. Ms Forbes became the first woman to take charge of a Budget, in either Holyrood or Westminster.

Income tax rates frozen for 2020-21

Ms Forbes began her speech by announcing there will be no rises to any income tax rates during the 2020-21 financial year. The basic and intermediate income tax band thresholds are set to increase in line with inflation, in a bid to protect middle and low-income earners. The higher and top rate income tax band thresholds will be frozen, which could penalise some higher earners that receive a pay rise into the higher or top rate thresholds in 2020-21.

The Scottish Government’s decision will raise a further £51m for the country, with 56% of Scottish taxpayers paying less tax than those elsewhere in the UK.

Income tax rates for 2020-21


Band name


£12,501 - £14,585

Starter Rate


£14,586 - £25,158

Scottish Basic Rate


£25,159 - £43,430

Intermediate Rate


£43,431 - £150,000

Higher Rate


Above £150,000

Top Rate


New tax band for Land and Buildings Transaction Tax

The Scottish Government confirmed plans to implement a new 2% band for Land and Buildings Transaction Tax, reserved specifically for non-residential leases, applicable to transactions where the net present value (NPV) of rental income over the period of the lease amounts to over £2m.

The Government aims that this legislation will be enabled from 7th February 2020. The new tax band will not be applicable to any transaction where a contract was entered into before 6th February 2020.

Investment pledges for low-carbon infrastructure

Ms Forbes then moved on to confirm an increase to the proportion of cash invested in Scotland’s low-carbon infrastructure. £1.8bn of capital investment will be made in low-carbon initiatives during 2020-21, amounting to a £500m increase of low-carbon spending year-on-year. As part of this investment, a Future Transport Fund will be made, investing exclusively in low-carbon transport alternatives for Scotland.

New lower business rate poundage for some commercial properties

Scotland's Government has sought to offer the most competitive business rates regime in the UK during 2020-21. This centres around offering the lowest business rate poundage (49.8p), which is a below-inflation rise for the second year running.

Furthermore, commercial properties with a rateable value of £51,000 - £95,000 will only be charged a further 1.3p on top of the Basic Property Rate. This new Intermediate Property Rate will cut rates liabilities for up to 9,500 small to medium-sized businesses by 3%.

Additional investment to support businesses 

This draft Budget also reaffirms the Scottish Government’s commitment to improving Scotland’s competitiveness. This will be achieved with:

  • Continued progress towards the £2bn Scottish National Investment Bank, which will benefit from £220m of additional seed funding.
  • £201m in funding ring-fenced for City Region and Growth Deals, with specific provision in place for new ambitious deals to benefit small business communities in the Borderlands, Stirling, Ayrshire, Clackmannanshire and Tay Cities.
  • Enhanced International Trade and Investment Budget, which will rise by 25% year-on-year. The funds are designed to support obtaining inward investment into Scottish businesses and foster innovation across the country.
  • A new Digital Development Loan that offers interest-free loans to small businesses, giving them the wherewithal to invest in digital technologies and skills.
  • An increase of investment in Skills Development Scotland to £224.8m, creating more apprenticeship opportunities for young people and inspiring the next generation of professionals for employers.
  • An additional £28m to be invested in South of Scotland Enterprise during 2020-21, improving the economic development of small businesses in key sectors such as creative industries, agriculture and forestry in the Scottish Borders, Dumfries and Galloway areas.
  • Investing £85m in active travel initiatives, designed to enable the delivery of high-quality walking, wheeling and cycling infrastructure, encouraging more sustainable travel options among commuters.
  • £645m investment for a “revolutionary expansion” of early learning and childcare across Scotland, saving households up to £4,500 per annum per child. The aim being to improve the balance between work and family life, giving people a chance to set up new businesses or seek employment elsewhere.

We are focused on keeping our clients up to date whenever any tax legislation changes. If you would like to learn more about us and how we could help you and your business then please get in touch with us on 0800 0523 555 or use our simple online request form.


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