New devolved Scottish taxes take effect

1 Apr 15

Scotland’s first new national taxes since 1707 came into force today as the Scottish Government’s Land and Buildings Transaction Tax, a replacement for UK Stamp Duty, and a new Landfill Tax take effect.

Scotland’s first new national taxes since 1707 came into force today as the Scottish Government’s Land and Buildings Transaction Tax, a replacement for UK Stamp Duty, and a new Landfill Tax take effect.

The new taxes, devolved to Holyrood under the 2012 Scotland Act, came as another major public service reform, the merger of health and social care provision under the Public Bodies (Joint Working) (Scotland) Act also moved closer to operation.

A new tax collection agency, Revenue Scotland, has today taken control of property and landfill taxes from Revenue & Customs, and will also assume responsibility in a year’s time for collecting basic rate income tax above 10p in the pound as set by the Scottish Parliament. Further fiscal devolution is in prospect under the Smith Commission reforms, proposed following last year’s ‘no’ vote on Scottish independence.

Holyrood ministers were keen to make LBTT more progressive than UK Stamp Duty, but Finance Secretary John Swinney was forced to revise his planned rates when Chancellor George Osborne unexpectedly amended the UK rates in last year’s Autumn Statement.

The end result is a Scottish tax which kicks in at £145,000 compared with the UK’s £125,000, but rises more sharply than the UK for transactions of £250,000 and above, reaching 10% at £325,001 against the UK’s £925,001, and 12% at £750,001 compared with £1.5m south of the border. Only the portion of value falling within each banding will be taxed at the higher rate.

The Conservatives claimed that the new Scottish regime would hit middle-range homeowners. Scottish leader Ruth Davidson called it ‘a tax grab on Scottish homebuyers’, arguing that it would have raised £30m more last year than was generated through Stamp Duty.

But the Scottish Government insisted the new rates would make no difference to half Scotland’s transactions, and cut charges for more than 40,000 house buyers. Only the top 10% will pay more, according to the Scottish government.

‘Our tax decisions have been driven by the principle that taxes should be proportionate to the ability to pay,’ Swinney said this morning. ‘Today is historic. For the first time in 300 years, with the launch of Revenue Scotland, Scotland is able to collect and manage some of our own taxes.’

Meanwhile, plans were finalised today in all 32 Scottish local authorities to pave the way for administrative and budgetary merger of council-run social care services with local NHS provision by next April.

The central aim of the reform is to smooth the transition from acute care to community-based care, especially for elderly patients, thereby reducing the problem of delayed discharge or ‘bed-blocking’ and reducing administrative costs.

New Integration Authorities are expected to pool around 60% of health board budgets and more than 70% of council care budgets. Target discharge times from hospital into community care are being halved from four weeks to two from today.

Merged care has already been piloted in the Highlands, where the NHS is lead agency for adult care and the council for children. A unified system has also been in existence in Northern Ireland for several decades, and similar plans are in prospect in Wales and through the Better Care Fund initiative in England.

‘It is predicted that by 2037 the number of people with a long-term condition will rise by 83% and what is clear is that the traditional models of care, where the NHS and the social care sector work independently of each other, are no longer suitable to care effectively for these people,’ Cabinet Secretary Shona Robison said.

‘Integration is one of the most ambitious programmes of work this government has undertaken, and one which we believe will deliver sustainable health and social care services for the future,' she added. 'Only now are other parts of the UK waking up to the need for change.’

  • Keith Aitken
    Keith Aitken

    covers Scottish affairs for Public Finance from Edinburgh. He was formerly economics editor and chief leader writer on The Scotsman and now has a busy freelance career as a writer, broadcaster and event chair.

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