Taxpayers caught in the Scottish Rate of Income Tax face no increase in the amount they pay for the year starting April 6, 2016.
The announcement was made by Scottish Government finance secretary John Swinney and marks the first regional assembly Budget speech in which income tax could be raised.
The announcement was widely expected as the Scottish National Party is facing a regional election in five months and was widely predicted not to rock the boat of their Westminster success at the expense of Labour earlier this year.
The Holyrood Parliament has limited tax raising powers from April 2016.
The Scottish Government gains the right to take roughly 10p in the £1 of income tax paid north of the border – or to set the precept at a higher or lower rate.
Effectively, Westminster takes a cut of 10p in the pound for Scottish taxpayers and the Scottish rate of income tax takes it back again.
The measure would affect anyone with their main home in Scotland, even if they are temporarily living overseas as an expat – including in England or Wales.
New tax for property investors
The major change in his Budget speech was to slap a Land and Buildings Transaction Tax surcharge of 3% on property investors buying a second home or buy to let property in Scotland.
The tax is the Scottish version of stamp duty in England and Wales.
Upping the tax follows the lead of Chancellor George Osborne in his Autumn Statement 2016, when he also increased stamp duty for property investors by 3%.
“The surcharge will apply to buyers of second homes or a buy-to-let s worth more than £40,000,” said Swinney.
Spending cuts limit decisions
He added that the tax was fair and aimed at protecting first-time buyers who competed with wealthy investors for affordable homes.
Other measures announced in the Budget include £55 million for the police to cover the costs of merging eight regional forces into a national police force, £45 million for additional primary health care and £90 million for affordable housing.
Swinney also explained he was limited to make financial changes due to public sector spending cuts ordered by the Westminster government that effectively would reduce money available in Scotland by 12.5% by 2020.
