Scottish Income Tax outturn figures for 2019/20 published

You can read more about the background to Scottish Income Tax and how some of the figures below are calculated by reading this joint statement from the Scottish government and HM Treasury.

The headline findings from the report – which remain provisional until formally signed off by the National Audit Office later this year – show that for the tax year 2019/20, £11,833 million of non-savings, non-dividend (NSND) income tax was collected in Scotland, 2.4 per cent more than 2018/19.

What is Scottish Income Tax?

Since 2017, the Scottish government has had the power to set rates and bands of income tax on NSND income. Colloquially, NSND income tax means earned income such as from an employment salary, income from pensions, profits from self-employment and rental profits.

What do today’s figures show?

Today’s figures show that in 2019/20, a total of £11,833 million was collected through Scottish Income Tax. This was £149 million than initially forecast by the Scottish Fiscal Commission (SFC).

The Block Grant Adjustment will be £184 million more as outturn data for income tax in the rest of the UK was also higher than forecast by the Office for Budget Responsibility (OBR). These differences between the SFC and OBR forecasts and outturn data will result in the Scottish budget being reduced by £34 million for 2022/23. This is known as a downward reconciliation. 

This takes into account the fact that this money would have already been ‘paid’ to the Scottish budget and is reconciled at a later date.

See the joint statement (also referred above) for further information on these calculations.

What else do the figures tell us?

The published figures show that there were 2,526,000 Scottish taxpayers in 2019/20, a very slight increase (0.1 per cent) on the previous year.

They also show that between 2018/19 and 2019/20, there was an increase in the proportion of Higher rate taxpayers in Scotland (14.1 percent compared to 12.8 per cent). This is attributed to changes in the band thresholds, which saw the Scottish higher rate frozen at £43,430 and the UK higher rate increase to £50,000.

Higher and top rate taxpayers in Scotland accounted for 14.6 per cent of taxpayers, and they were liable for 60.3 per cent of all Scottish Income Tax collected. This compares with the 12.2 per cent who account as higher and additional rate taxpayers in the rest of the UK who are liable for 64.4 per cent of the revenues raised.

The Scottish ‘starter rate’ of income tax – which ensured that Scottish taxpayers with earned income of less than £26,990 paid less income tax than an equivalent UK taxpayer in 2019/20 – was the highest marginal rate of tax paid by 9.9 per cent of Scottish taxpayers. It accounted for 7.7 per cent of income tax raised.

The Fraser of Allander Institute has published a briefing analysing the figures.

They note that in December 2018, the Scottish government expected its income tax policy to raise an additional £500 million compared to the amount that would have been raised had UK rates apply.

They add that the actual amount raised was “clearly less”, which is attributed to the “relatively slower growth of the Scottish income tax base compared to rUK” and is reflected in the block grant adjustment.

The Fraser of Allander add that when the budget and block grant for 2019/20 was decided, this ‘net’ tax position had been calculated to leave Scotland £182 million better off. The subsequent outturn figure of £149 million means that this ‘extra’ money will be reduced by £34 million, a figure they describe as “peanuts in the context of the Scottish budget”.

Scotland’s public finance minister, Tom Arthur, said in response to the figures that the government’s approach to income tax “have resulted in a fairer and more progressive system which delivers the widest range of public services in the UK”.

Chris Young, CIOT External Relations.