Derek Mackay, Scottish Finance Secretary, delivered his eagerly anticipated draft budget for 2018-19 to Holyrood on 14 December. I say eagerly awaited, because much had been said in the build up about whether or not, and to what extent, Mackay would propose that Scotland’s income tax varying powers should be used. The Scottish Government’s discussion paper on ‘The Role of Income Tax in Scotland’s Budget’, issued in November 2017, set out five possible illustrative ways in which tax rates for earned income could be altered. What Mackay actually announced on 14 December, which he hopes parliament will ratify, is a new sixth way. He has proposed that five different tax bands apply for 2018-19, as outlined in Table 1.

With Scotland’s tax rate varying powers now being utilised it is obviously relevant to compare the proposed rates to those which will apply in the rest of the UK. The ‘progressive’ tax system proposed by the Scottish Government aims to require higher rate and additional rate earners to pay more, while protecting those whose earnings mean that they pay only basic rate tax.

Some quick calculations confirm that a Scottish tax payer earning, say, £25,000 will pay more or less the same amount of tax as those in the rest of the UK, while a Scottish tax payer earning, say, £200,000 in 2018-19 will pay just over £2,000 more tax than similar earners in the rest of the UK. The tax rate changes are expected to raise an additional £164m for Scottish Government spending. Given that four of the five main Scottish political parties included some form of income tax rise in their manifestos, I would expect the proposals to be voted through.

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Another measure in the draft budget which will be of particular interest to those in rural communities is the allocation of £600m to ensure that every premise in Scotland has access to superfast broadband by 2021. The lack of connectivity is often cited as a major factor holding back economic growth and productivity in rural parts of Scotland in particular, so this measure, once delivered, must be welcomed.

Also, to some extent following a move made at UK level to remove stamp duty for first time buyers on the purchase of a home up to £300,000, the Finance Secretary has announced his intention to give first time buyers in Scotland full relief from Land and Buildings Transaction Tax (LBTT) on purchases up to £175,000.

The draft budget will now be subject to parliamentary scrutiny and debate, with no doubt plenty of behind the scenes discussion and deal making too, before a final vote is held in Holyrood on 19 February.