Today [30 November] the UK Government will make the formal Parliamentary orders which confirm that landmark new income tax powers will transfer to the Scottish Parliament.
As a result, from April next year, Holyrood will control income tax rates and thresholds.
The move, on St Andrew’s Day, comes two years on from the publication of the Smith Commission’s report which, in the wake of the 2014 independence referendum, recommended which powers should transfer to Holyrood from Westminster. The Scotland Act 2016 took forward the report’s recommendation in full.
Scottish Secretary David Mundell said:
With these landmark powers over income tax, the Scottish Parliament will become one of the most powerful devolved parliaments in the world.
The Scottish Government will now have unprecedented power to shape the economy of Scotland. Crucially, for the first time, it will not only have to account to the people of Scotland for the money it spends, but also for the money it plans to raise.
Through the Scotland Act 2016 and, most recently, the Autumn Statement, the UK Government has provided more powers and more funding for Scotland. It’s now over to the Scottish Government to set out how it plans to use these powers to drive jobs and growth in Scotland.
From 6 April 2017, Holyrood will have the power to:
- Set income tax rates (currently 20%, 40% and 45%).
- Set income tax thresholds (currently £11k, £42.7k and £150k - from 5 April 2017 in the rest of the UK these will be £11.5k (rising to £12.5k by 2020), £43k (rising to £50k by 2020) and £150k).
The transfer of powers comes after last week’s Autumn Statement, in which the UK Government boosted the Scottish Government’s budget by more than £800 million through to 2020/21, giving it spending power to boost productivity and promote growth in Scotland, all while supported by the broad shoulders of the UK.
How the increase in this capital budget is spent in Scotland is now down to the Scottish Government, which has the opportunity to take its own investment decisions as well as using its own tax, borrowing and welfare powers.
Today’s move on the devolution of these income tax powers comes after a range of powers on welfare, consumer advice, Ofcom, gaming machines, equalities and transport have already been transferred. These powers are being transferred while maintaining for people in Scotland the benefits of being part of a strong United Kingdom. Scotland has two governments, each with different but complementary responsibilities, and it is vital that they continue to work closely together in the national interest.