London Daily

Focus on the big picture.
Friday, Aug 22, 2025

What the mini-budget means for Scotland

What the mini-budget means for Scotland

We've had three changes of prime minister in six years, each one setting out to refresh the Conservative government. Kwasi Kwarteng has served notice with his mini-budget that this is a more radical reversal and change of direction than we've seen before.

There are very big commitments to cut tax - rising from £4 billion to nearly £45 billion four years from now - with very few indications of how it is to be paid for.

The intention is to boost the growth path of the economy, and if that means more people making and spending more money, there should be a consequent rise in revenues with which to sustain spending levels.

That is a gamble, and it is all the riskier to be doing this while the economy is probably already in recession, business and consumer confidence is low, and unleashing tax cuts runs contrary to the efforts of the Bank of England to bring inflation under control with higher interest rates.

Several of the chancellor's measures will affect Scots, including the reversal of April's National Insurance increase for employers and employees, and retention of the corporation tax rate.

Scotch whisky distillers and brewers will welcome an end to planned reforms of alcohol duty. Retailers are pleased to see a new system to boost VAT-free shopping by foreign tourists. Reversal of tax reforms for self-employed people will also cover the whole UK.

But big elements will not apply in Scotland, including the cut in additional rate income tax from 45% to 40% on earnings above £150,000. The rate in Scotland remains at 46%.

A cut in basic rate tax from 20p in the pound to 19p does not apply in Scotland. The basic rate has different thresholds for Scottish taxpayers.

The chancellor's stamp duty cut for property transactions applies in England and Northern Ireland, while Scotland and Wales have different systems, which are diverging even more as the Treasury opts to raise the threshold at which transaction tax starts to be paid.

Holyrood ministers must decide how to use any extra money


What this will mean for Holyrood is an increase in block grant from the Treasury, of £630m spread over this year and the next two financial years.

A tax cut that doesn't apply to Scots is treated by the Treasury as a giveaway to non-Scottish individuals, and a proportionate share of that giveaway is handed to Holyrood, for Scottish ministers to deploy as they choose.

The effect of cutting basic rate income tax for the rest of the UK is a boost for Holyrood of £340m over next financial year and the year after.

A small part of the extra funds are added this year due to the immediate introduction of reduced property transaction tax in England and Northern Ireland. That element adds up to £170m over three years.

Some £120m is in lieu of the reduction in top rate income tax, which is cutting the tax bill for the average non-Scots high earner by £10,000. That widens the gap between Scots and non-Scots high earners, when Scots already pay higher tax rates above £50,000.

What can Holyrood ministers do with that money? They can cut tax in similar ways or different ways, or they can use that money to spend on different priorities.

A further reform of tax is in Investment Zones, going further than freeports to offer tax breaks on National Insurance, business rates and transactions tax.

The Treasury is already talking to councils in 38 areas of England about gaining that advantage, and it says it will also deploy this approach in Scotland, Wales and Northern Ireland.

As with freeports, it does not have control over several of the measures promised in England - business rates, property transaction tax, planning and some regulation. But it will challenge devolved administrations to join in or lose out.

There was little indication from Mr Kwarteng of a squeeze on spending to help pay for nearly £45bn of tax cuts, so the implication is of a big increase in borrowing and to both the annual deficit and Britain's pile of debt. Spending cuts may be for another day.

Newsletter

Related Articles

0:00
0:00
Close
After 200,000 Orders in 2 Minutes: Xiaomi Accelerates Marketing in Europe
Ukraine Declares De Facto War on Hungary and Slovakia with Terror Drone Strikes on Their Gas Lifeline
Animated K-pop Musical ‘KPop Demon Hunters’ Becomes Netflix’s Most-Watched Original Animated Film
New York Appeals Court Voids Nearly $500 Million Civil Fraud Penalty Against Trump While Upholding Fraud Liability
Elon Musk tweeted, “Europe is dying”
Far-Right Activist Convicted of Incitement Changes Gender and Demands: "Send Me to a Women’s Prison" | The Storm in Germany
Hungary Criticizes Ukraine: "Violating Our Sovereignty"
Will this be the first country to return to negative interest rates?
Child-free hotels spark controversy
North Korea is where this 95-year-old wants to die. South Korea won’t let him go. Is this our ally or a human rights enemy?
Hong Kong Launches Regulatory Regime and Trials for HKD-Backed Stablecoins
China rehearses September 3 Victory Day parade as imagery points to ‘loyal wingman’ FH-97 family presence
Trump Called Viktor Orbán: "Why Are You Using the Veto"
Horror in the Skies: Plane Engine Exploded, Passengers Sent Farewell Messages
MSNBC Rebrands as MS NOW Amid Comcast’s Cable Spin-Off
AI in Policing: Draft One Helps Speed Up Reports but Raises Legal and Ethical Concerns
Shame in Norway: Crown Princess’s Son Accused of Four Rapes
Apple Begins Simultaneous iPhone 17 Production in India and China
A Robot to Give Birth: The Chinese Announcement That Shakes the World
Finnish MP Dies by Suicide in Parliament Building
Outrage in the Tennis World After Jannik Sinner’s Withdrawal Storm
William and Kate Are Moving House – and the New Neighbors Were Evicted
Class Action Lawsuit Against Volkswagen: Steering Wheel Switches Cause Accidents
Taylor Swift on the Way to the Super Bowl? All the Clues Stirring Up Fans
Dogfights in the Skies: Airbus on Track to Overtake Boeing and Claim Aviation Supremacy
Tim Cook Promises an AI Revolution at Apple: "One of the Most Significant Technologies of Our Generation"
Apple Expands Social Media Presence in China With RedNote Account Ahead of iPhone 17 Launch
Are AI Data Centres the Infrastructure of the Future or the Next Crisis?
Cambridge Dictionary Adds 'Skibidi,' 'Delulu,' and 'Tradwife' Amid Surge of Online Slang
Bill Barr Testifies No Evidence Implicated Trump in Epstein Case; DOJ Set to Release Records
Zelenskyy Returns to White House Flanked by European Allies as Trump Pressures Land-Swap Deal with Putin
The CEO Who Replaced 80% of Employees for the AI Revolution: "I Would Do It Again"
Emails Worth Billions: How Airlines Generate Huge Profits
Character.ai Bets on Future of AI Companionship
China Ramps Up Tax Crackdown on Overseas Investments
Japanese Office Furniture Maker Expands into Bomb Shelter Market
Intel Shares Surge on Possible U.S. Government Investment
Hurricane Erin Threatens U.S. East Coast with Dangerous Surf
EU Blocks Trade Statement Over Digital Rule Dispute
EU Sends Record Aid as Spain Battles Wildfires
JPMorgan Plans New Canary Wharf Tower
Zelenskyy and his allies say they will press Trump on security guarantees
Beijing is moving into gold and other assets, diversifying away from the dollar
Escalating Clashes in Serbia as Anti-Government Protests Spread Nationwide
The Drought in Britain and the Strange Request from the Government to Delete Old Emails
Category 5 Hurricane in the Caribbean: 'Catastrophic Storm' with Winds of 255 km/h
"No, Thanks": The Mathematical Genius Who Turned Down 1.5 Billion Dollars from Zuckerberg
The surprising hero, the ugly incident, and the criticism despite victory: "Liverpool’s defense exposed in full"
Digital Humans Move Beyond Sci-Fi: From Virtual DJs to AI Customer Agents
YouTube will start using AI to guess your age. If it’s wrong, you’ll have to prove it
×