New income tax band in Scotland will hit everyone earning over £75,000

New income tax band in Scotland will hit everyone earning over £75,000
  • PublishedDecember 20, 2023

The move was announced by deputy first minister and finance secretary Shona Robison as she unveiled the Scottish budget in a statement at Holyrood on Tuesday.

A new tax threshold has been created for high earners in Scotland, meaning anyone who earns more than £75,000 will pay a rate of 45%.

Scotland already had the highest tax band in the UK at 47% for people earning more than £125,000.

This will also rise by 1% next year to 48%.

The new rate takes the number of income tax bands in Scotland to six, while the rest of the UK has three.

When compared to income taxpayers elsewhere across the country, those earning £100,000 or more in Scotland will pay £3,346 more, and anyone who makes in excess of £28,850 will pay higher taxes than workers elsewhere in Britain.

The move was announced by deputy first minister and finance secretary Shona Robison as she unveiled her first Scottish budget in a statement at Holyrood on Tuesday.

The starter, basic, intermediate and higher bands will see their rates frozen at 19%, 20%, 21% and 42% respectively.

The rate at which the basic and intermediate bands kick in has also been increased by inflation.

The changes have been designed to help plug a £1.5bn black hole in the country’s finances.

The Fraser of Allander Institute (FAI) previously said the new band would only raise around £60m for spending.

Meanwhile, the Scottish Fiscal Commission estimates that overall income tax will raise £18.8bn in 2024-25.

Scottish income tax bands:
 Starter (19%): £12,571 – £14,876
 Basic (20%): £14,877 – £26,561
• Intermediate (21%): £26,562 – £43,662
 Higher (42%): £43,663 – £75,000
 Advanced (45%): £75,001 – £125,140
 Top (48%): Above £125,140

Other major announcements:

• Council tax freeze

The Scottish government will fully fund its proposed council tax freeze, providing local government with the equivalent of a 5% rise.

Ms Robison said it will deliver more than £140m of additional investment for local services.

She added: “Combined with the other support being provided to local government, this will increase their overall funding by 6% since the last budget, taking local government funding to a new record high of over £14bn.”

• School meal debt cancelled

Councils will also be provided with £1.5m to wipe out school meal debt incurred by pupils across Scotland.

Ms Robison said the move would remove a “worry hanging over families up and down the country who are struggling to make ends meet”.

• Scottish Child Payment

Ministers will spend £6.3bn on social security benefits.

Scottish benefits will go up by 6.7% in line with the CPI rate of inflation from September 2023, with the Scottish Child Payment increasing from £25 to £26.70 from April.

• NHS funding

Addressing MSPs, Ms Robison said funding for NHS boards will rise by £550m, or 4.3%. She said the uplift was “above real terms” and would amount to £13.2bn.

“This investment will help the NHS continue to evolve its delivery of services and work to improve waiting times,” she added.

• Police and fire services

More than £1.5bn will be given to Police Scotland to support frontline services and key priorities, such as body-worn cameras. Almost £400m has also been pledged to support the Scottish Fire and Rescue Service.

• Business rates

Business rates for premises valued at less than £51,000 will be frozen, while hospitality businesses in Scotland’s islands will be given 100% relief.

• Housing and transport

Elsewhere, Ms Robison promised to invest almost £2.5bn on public transport, along with £550m in the supply of affordable housing.

Ms Robison said Scotland is at the “upper limit of mitigation” that can be provided within the devolved settlement.

“Quite simply we cannot spend money that we do not have, and we cannot mitigate every cut made by the UK government,” she said.

Ms Robison added that the Scottish government will “always do our best with the powers we have”, but said they are “simply no substitute for independence”.

The autumn statement from the chancellor showed why Scotland “must walk a different path”, she added.

“Through the choices we have made in this budget we have been true to our values and rigorous in prioritising our investment where it will have the most impact,” she said.

“Our social contract with the people of Scotland is at the core of this budget and shines through every funding decision contained within it.

“We choose investment in our people and public services.”

‘Dismal and damaging’

MSP Liz Smith, finance and local government spokesperson for the Scottish Conservatives, branded the budget “dismal and damaging for Scottish taxpayers and businesses”.

Ms Smith said: “Under the SNP, Scotland was already the highest taxed part of the UK – and the income tax rises announced by Shona Robison have only widened that gap and increased the burden on hard-working Scots.

“They mean that 100,000 more Scots are now paying the higher rate of tax.

“This will have a devastating effect on our ability to recruit and retain skilled workers, including the doctors and dentists Scotland’s under-resourced NHS desperately needs.”

‘Council tax freeze will be a disaster’

Lilian Macer, Scottish secretary at Unison, described it as a “bad day for local services”.

She added: “Our public services are on their knees due to years of underinvestment and the Scottish government’s council tax freeze will be a disaster for local services.

“We need to see investment in public services and a council tax freeze stops investment in public services, in schools and in the NHS.”

Ms Macer welcomed the investment in the NHS, but said questions remain over how the funding will help tackle the industry’s staffing crisis.

‘It’s disappointing’

Action for Children said it was “disappointing” that First Minister Humza Yousaf’s pledge to increase the Scottish Child Payment to £30 had not been met.

Fiona Steel, national director for Scotland at the charity, welcomed the small uplift to £26.70, but said: “This budget will mean some impossible choices for families, and we know first-hand the impact it will have on children and young people.”


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