Taxation in Scotland today involves payments that are required to be made to three different levels of government: to the

UK government His Majesty's Government, abbreviated to HM Government or otherwise UK Government, is the central government, central executive authority of the United Kingdom of Great Britain and Northern Ireland.

, to the

Scottish Government The Scottish Government (, ) is the executive arm of the devolved government of Scotland. It was formed in 1999 as the Scottish Executive following the 1997 referendum on Scottish devolution, and is headquartered at St Andrew's House in ...

and to

local government Local government is a generic term for the lowest tiers of governance or public administration within a particular sovereign state. Local governments typically constitute a subdivision of a higher-level political or administrative unit, such a ...

. Currently 32.4% of taxation collected in

Scotland Scotland is a Countries of the United Kingdom, country that is part of the United Kingdom. It contains nearly one-third of the United Kingdom's land area, consisting of the northern part of the island of Great Britain and more than 790 adjac ...

is in the form of taxes under the control of the

Scottish parliament The Scottish Parliament ( ; ) is the Devolution in the United Kingdom, devolved, unicameral legislature of Scotland. It is located in the Holyrood, Edinburgh, Holyrood area of Edinburgh, and is frequently referred to by the metonym 'Holyrood'. ...

and 67.6% of all taxation collected in Scotland is reserved to the UK Parliament.

History

Until the 17th century, taxation was regarded as 'an extraordinary source of revenue that was levied for a specific purpose such as the defence of the realm'. However, during the 17th century,

Parliament In modern politics and history, a parliament is a legislative body of government. Generally, a modern parliament has three functions: Representation (politics), representing the Election#Suffrage, electorate, making laws, and overseeing ...

permitted a Land Tax to be collected from 1667, a

Hearth tax A hearth tax was a property tax in certain countries during the medieval and early modern period, levied on each hearth, thus by proxy on wealth. It was calculated based on the number of hearths, or fireplaces, within a municipal area and is con ...

from 1691 to 1695 and a

Poll tax A poll tax, also known as head tax or capitation, is a tax levied as a fixed sum on every liable individual (typically every adult), without reference to income or resources. ''Poll'' is an archaic term for "head" or "top of the head". The sen ...

from 1693 to 1699. The 1707 Union of the

Kingdom of Scotland The Kingdom of Scotland was a sovereign state in northwest Europe, traditionally said to have been founded in 843. Its territories expanded and shrank, but it came to occupy the northern third of the island of Great Britain, sharing a Anglo-Sc ...

with the

Kingdom of England The Kingdom of England was a sovereign state on the island of Great Britain from the late 9th century, when it was unified from various Heptarchy, Anglo-Saxon kingdoms, until 1 May 1707, when it united with Kingdom of Scotland, Scotland to f ...

formed a new

Kingdom of Great Britain Great Britain, also known as the Kingdom of Great Britain, was a sovereign state in Western Europe from 1707 to the end of 1800. The state was created by the 1706 Treaty of Union and ratified by the Acts of Union 1707, which united the Kingd ...

, so that responsibility for taxation in Scotland became a matter for the

Westminster Parliament The Parliament of the United Kingdom of Great Britain and Northern Ireland is the supreme legislative body of the United Kingdom, and may also legislate for the Crown Dependencies and the British Overseas Territories. It meets at the Palace of ...

, now the legislature for the new state.

Devolution of tax powers

The creation of a devolved Scottish parliament in 1999 was accompanied by a limited transfer of taxation powers: the

Scotland Act 1998 The Scotland Act 1998 (c. 46) is an Act of the Parliament of the United Kingdom which legislated for the establishment of the devolved Scottish Parliament with tax varying powers and the Scottish Government (then Scottish Executive). It was o ...

transferred the power to legislate for local taxation and also the power to vary income tax by plus or minus 3 pence in the pound. Most taxation powers in Scotland following the creation of the parliament remained a reserved matter for Westminster. Following the Calman Commission, the

Scotland Act 2012 The Scotland Act 2012 is an Act of the Parliament of the United Kingdom. It sets out amendments to the Scotland Act 1998, with the aim of devolving further powers to Scotland in accordance with the recommendations of the Calman Commission. It ...

transferred powers over

Stamp duty Land Tax Stamp duty in the United Kingdom is a form of tax charged on legal instruments (written documents), and historically required a physical stamp to be attached to or impressed upon the document in question. The more modern versions of the tax no ...

, and Landfill Tax (both since replaced by

Land and Buildings Transaction Tax Land and Buildings Transaction Tax (LBTT) is a property tax in Scotland. It replaced the Stamp Duty Land Tax from 1 April 2015. LBTT is a tax applied to residential and commercial land and buildings transactions (including commercial purchases ...

and Scottish Landfill Tax, respectively) and reduced rates of Income tax in Scotland by 10 pence in the pound at all bands, reducing the Barnett formula by the equivalent sum, and requiring the Scottish parliament to set a Scottish Income tax rate to replace the lost revenue but with the ability to set it higher or lower than 10 pence in the pound if it wished. Following promises made during the Scottish independence referendum that led to the

Smith Commission The Smith Commission was announced by Prime Minister David Cameron on 19 September 2014 in the wake of the 'No' vote in the 2014 Scottish independence referendum. The establishment of the commission was part of the process of fulfilling The Vow ...

, the

Scotland Act 2016 The Scotland Act 2016 (c. 11) is an act of the Parliament of the United Kingdom. It sets out amendments to the Scotland Act 1998 and devolves further powers to Scotland. The legislation is based on recommendations given by the report of the Smi ...

added powers over

Air Passenger Duty Air Passenger Duty (APD) is an excise duty which is charged on the carriage of passengers flying from a United Kingdom or Isle of Man airport on an aircraft that has an authorised take-off weight of more than 5.7 tonnes or more than twenty seat ...

and full control over Income tax on non savings and non dividend income (excluding the personal allowance which is still set by the UK parliament.) Despite these tax powers having been transferred, over half of all taxes collected in Scotland remains under the direct control of the UK parliament which has remained a reserved matter to itself all powers over

Corporation tax A corporate tax, also called corporation tax or company tax or corporate income tax, is a type of direct tax levied on the income or capital of corporations and other similar legal entities. The tax is usually imposed at the national level, but i ...

National Insurance National Insurance (NI) is a fundamental component of the welfare state in the United Kingdom. It acts as a form of social security, since payment of NI contributions establishes entitlement to certain state benefits for workers and their famil ...

Value-added tax A value-added tax (VAT or goods and services tax (GST), general consumption tax (GCT)) is a consumption tax that is levied on the value added at each stage of a product's production and distribution. VAT is similar to, and is often compared wi ...

(VAT),

Capital gains tax A capital gains tax (CGT) is the tax on profits realized on the sale of a non-inventory asset. The most common capital gains are realized from the sale of stocks, bonds, precious metals, real estate, and property. In South Africa, capital g ...

Inheritance tax International tax law distinguishes between an estate tax and an inheritance tax. An inheritance tax is a tax paid by a person who inherits money or property of a person who has died, whereas an estate tax is a levy on the estate (money and pro ...

, Aggregates Levy Insurance Premium Tax and Motoring taxes.

References

{{Economy of Scotland

History

Devolution of tax powers

See also

References