(AFP) -  Scotland could be handed sweeping new powers including setting its own income tax rates and controlling welfare payments under a new plan unveiled by a government-appointed commission on Thursday.

"The recommendations in the agreement will result in the biggest transfer of powers to the Scottish parliament since its establishment," Lord Robert Smith, who chaired the group, said in Edinburgh.

The report follows up on a promise made by the leaders of Britain's three main political parties to grant Scotland greater autonomy ahead of an independence referendum in September.

Other proposals are control over air passenger duty and part of national sales tax, as well as the right for 16- and 17-year-olds to vote in Scottish elections, below the national threshold of 18.

British Prime Minister David Cameron said he was "delighted" with the plan: "This is a good day for the UK... We are keeping our promise to the Scottish people.

He also promised to put forward a plan before Christmas to grant greater devolution to England -- a key demand from supporters in England who resent the powers being given to Scotland.

The government has come under pressure to deliver on its promise after a close-run victory for those who wanted Scotland to remain in the United Kingdom.

Scotland's devolved government is controlled by the pro-independence Scottish National Party (SNP), whose ranks have swelled since the referendum.

"This process was always going to be difficult. It demanded a compromise from everyone involved," Smith said, adding: "They've shown that, however difficult, our political leaders can come together."

The right to full control over income rax rates was backed by the Cameron's Conservatives and the SNP but the opposition Labour Party long resisted the change.

"As a result of this agreement the parliament will be more powerful, more accountable and more autonomous," Smith said.

But he also cautioned on the time needed to implement reforms, saying: "Change of this magnitude cannot be rushed through."

Thursday's report is the result of more than a month of talks with representatives of the Scottish Parliament's five political parties and also took into account 400 submissions from organisations and more than 18,000 contributions from the general public.