Scotland should be given control over income tax rates and bands, a commission on devolution is expected to say in a report published on Thursday.
The Smith Commission, set up by the UK Government, will also recommend giving “a substantial package of welfare powers” to the Holyrood Parliament, according to BBC News.
However sources told the broadcaster that the personal allowance - the level at which people must start to pay tax on their income - would continue to be set by Westminster along with other taxes such as VAT.
Edinburgh would also organise elections to the Scottish Parliament, meaning it could decide to allow 16- and 17-year-olds to vote as in the independence referendum.
Scotland’s First Minister, Nicola Sturgeon, said she was optimistic about the Smith Commission’s recommendations.
But she added: “If those high hopes are not delivered on, it won't be me the unionist parties have to worry about - it will be the wrath of the Scottish people.”
Ms Sturgeon said Scotland should be given control of the personal allowance to help reduce levels of poverty.
“How can anybody argue that anything less than controlling half of your own tax base adds up to meaningful home rule?” she said.
The Guardian reported that the commission would recommend giving some powers over housing benefit, although a Labour proposal for full control to be devolved was dropped as it is too tied up in the Universal Credit system.
A Labour source told the paper that following the referendum “we needed to show good faith and show we understand that people voted for change.”
The leaders of the Conservatives, Labour and Liberal Democrats all said during the independence referendum campaign that further powers would be devolved to Scotland after polls suggested the Yes campaign might win.
The Daily Telegraph reported that Scottish MPs would retain full voting rights at Westminster under the plan, despite calls for them to be excluded from issues that do not affect Scotland. There are fears that excluding Scottish MPs from English-only matters could break up the Union.
It said the Barnett formula – used to decide how much public money Scotland receives from the UK – was expected to remain despite complaints that it is too generous towards Scots.
Peter Bone, Conservative MP for Wellingborough, told The Telegraph: “If it's true they're going to get full income tax powers, there is no point having the Barnett formula at all.
“A lot of people didn't like the Barnett formula before Devo Max. This is going to make people think there is even more reason for it to go.”
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