As the Scottish gear up for their 2021 parliamentary election on 6 May 2021, the parties have published their Holyrood election manifestos, unveiling their visions for Scotland, we examine the tax plans for the main parties and how they will affect businesses and individual taxpayers
Under the Scottish National Party and Nicola Sturgeon, Scotland has grasped their devolved tax powers with both hands and have created the most progressive tax and benefit powers in the UK, according to a report by the Institute for Fiscal Studies (IFS). With new issues coming to light from Brexit and Covid-19 that now have to be taken into consideration, how are the main Scottish political parties approaching taxation in the 2021 election.
Scottish National Party (SNP):
The Scottish National Party (SNP) has already made changes to Scottish income tax due to devolution away from Westminster and as they push for an independent Scotland referendum, the SNP are wanting full control over their taxation system.
Scotland already has a five-band structure of Scottish income tax, with the starter rate at 19% and the top rate at 46%. The SNP aims to maintain the current Income Tax rates for the duration of parliament and only increase thresholds by a maximum of inflation, this would mean there would be no immediate changes to the income tax system under the SNP.
On council tax, finance secretary Kate Forbes vowed to introduce a policy of Scottish residents not paying council tax until they turn 21. This change to the council tax system would save young people living in their own property hundreds of pounds per year. For a young person living alone in a Band B property that will mean an annual saving of around £750. In March 2021, all 32 of Scotland’s councils froze their council tax rates for 2021/22.
The Scottish government gave local authorities a cash equivalent of a 3% council tax increase in return for not putting up levels. This will continue under the SNP as they believe that this will help families facing unprecedented challenges during the pandemic.
The SNP will also gradually reduce the large business supplement over the course of the Parliament to ensure that the largest businesses pay the same combined business rates in Scotland as in England and will explore the possibility of levying a higher rate on properties where the owner is registered in a tax haven.
In the 2016 Scottish election, the Scottish Greens delivered a manifesto pledge of fairer income tax, creating new starter and intermediate tax bands and delivering a system that means most pay less whilst the wealthy pay more. The Greens continue this more progressive approach to income tax in their 2021 election manifesto wanting to create new starter and intermediate tax bands to deliver a system where most Scottish citizens will pay less income tax and the wealthier pay more.
The Greens have come to this election in support of an independent Scotland, and in their manifesto state that, if not independent, they want full devolution of tax powers to Holyrood from Westminster. They want the power to tax consumption of luxury goods, carbon emissions from corporations and the wealthiest in Scotland. The have also called for an urgent one-off windfall tax on the profits earned by larger companies as a result of the pandemic, they say this would help support the recovery of sectors that have suffered the most during lockdown.
The Greens believe that council tax is regressive and ‘woefully outdated’ and will replace it with a new residential property tax that is related to actual value, this means those with larger estates would pay more under this new system.
The most significant part of the Greens’ tax policies would be the ‘millionaire’s tax’. This policy would introduce a 1% annual wealth tax on those classed as ‘millionaires’. The tax would be on all wealth and assets above £1m threshold, including property, land, pensions, and other assets. The Greens claim that this tax would only apply to the wealthiest 10% in Scottish society. They will explore the possibility of empowering and supporting Scottish local authorities to introduce wealth taxes within their own areas.
They also want to establish a ‘citizens’ assembly’, which will explore the future of taxation and funding public services.
Scottish Conservative Party:
The main part of the Conservative manifesto is that the Conservative party will oppose the idea of a second Scottish independence referendum as they believe that the first step is to rebuild Scotland after the Covid-19 pandemic and that must come first before tax cuts can be announced.
The Scottish Conservatives state that they want to realign Scottish income tax rates and bands with the rest of the UK, though they will retain the new starter rate of 19% for low earners, that the SNP introduced in 2018. The manifesto also announced plans to abolish Scotland’s higher rate of income tax increasing the threshold from £43,663 to match the UK government’s level of £50,270. The revised income tax threshold would increase the take home pay for 1.1 million of Scotland’s highest earners, the Scottish Conservatives have said.
The Scottish Conservatives will also increase the threshold for paying land and buildings transaction tax (LBTT), the equivalent of stamp duty land tax in the rest of the UK, to £250,000, with the 5% band starting from that point as it does now. This means that over three quarters of home buyers would pay no tax at all. They would also introduce this threshold for non-residential property.
To support business after the pandemic and prevent a cliff edge increase in taxes on those that are already struggling, the Scottish Conservatives will maintain the 100% rates relief on leisure, hospitality, retail, newspaper and aviation businesses for the whole of 2021-22. Given the continued economic uncertainty they would also look to offer at least 25% rates relief to businesses over 2022-23, the exact level they state will be dependent on the economic conditions at the time. They would also maintain the rate freeze until the 2023 revaluation.
The Scottish Labour party has stated that the party will not support a second independence referendum but would be in favour of more devolved powers for Scotland.
They say that with the UK’s departure from the EU more powers will be given to the Scottish parliament in the coming years, but they say that reform is needed to ensure the ‘powers’ are used effectively. Scottish Labour say that they have a ‘broader and more ambitious vision’ which involves a redesign of the UK’s democratic institutions, giving more powers of scrutiny for Holyrood, and a radical transfer of powers from Edinburgh into local communities.
In regard to income tax, Scottish labour has ruled out raising income tax for Scots earning less than £100,000 a year but leader of Scottish Labour, Anas Sarwar says he is in favour of ‘progressive taxation’, saying if extra funds were needed, he would not be adverse to increasing tax for those ‘with the broader shoulders’ if necessary, those earning over £100,000 or £150,000. Scottish Labour says that their plans for jobs, skills and the economy would grow their income tax receipts.
Scottish Labour will maintain the business rates exemption for non-grocery bricks and mortar retail for the 2021/22 financial year and proposes levelling up the business rates imposed on large warehouses used by majority online retailers versus bricks and mortar stores. From 2022/23, there will be a 20% reduction in non-grocery bricks and mortar business rates, with a 20% increase in the rates paid by retail warehouses.
The party also said it would explore ‘a series of new and fairer forms of taxation’ on areas that they recognise are common goods but are currently used by the private sector, such as land value capture and taxes based on the polluter pays principle. Another taxation Scottish Labour will ‘explore’ is how they can appropriately tax online giants such as Amazon, to rebalance the economy. The details on the sow-called ‘Amazon tax’ were scarce, but the idea of this tax would focus on online companies that have profited extortionately from the pandemic and use the money raised to help reinvigorate the high streets.
Scottish Labour, like the Greens, would abolish council tax and replace it with a ‘fairer alternative’ which would be based on property values and ability to pay. They also stated that if a freeze of council tax was imposed by central government, then it must be fully funded so no more cuts to services have to be made.
Article updated on 22 April following the release of the Scottish Labour manifesto