Scottish Budget hikes income tax for higher earners

The Scottish government presented its 2024/25 Budget to Holyrood yesterday. The headline changes are a move to a six-tier income tax system, and a hike for those the government deems “higher earners”. Who will these changes affect?

Scottish Budget hikes income tax for higher earners

Income tax is a fully devolved matter in Scotland – at least in respect of the rates and thresholds that apply. The Scottish government must, however, conform to the UK personal allowance, dividend rates, NI rates and thresholds. The Budget for 2024/25 has made more changes to the income tax rates and thresholds. The current and proposed positions for 2024/25 is shown in the following tables:

 

2023/24

Band

Income Range

Rate

Starter Rate

£12,571 - £14,732*

19%

Basic Rate

£14,733 - £25,688

20%

Intermediate Rate

£25,689 - £43,662

21%

Higher Rate

£43,663 - £125,140

42%

Top Rate

Above £125,140**

47%

 

2024/25

Band

Income Range

Rate

Starter rate

£12,571 – £14,876*

19%

Basic rate

£14,877 - £26,561

20%

Intermediate rate

£26,562 - £43,662

21%

Higher rate

£43,663 - £75,000

42%

Advanced rate

£75,001 - £125,140

45%

Top rate

Over £125,140**

48%

*Assumes individuals are in receipt of the Standard UK Personal Allowance.

**Those earning more than £100,000 will see their Personal Allowance reduced by £1 for every £2 earned over £100,000.

As Scottish taxpayers are required to pay NI in accordance with the main UK rates, the overall position will be even more complicated. For example, higher rate taxpayers in Scotland could pay Class 1 NI at 10% or 2%, depending on whether their income exceeds £50,270 or not. Those with a mix of earned and investment income (especially dividends) will find things even more complex next year.

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