The Deputy First Minister, Shona Robison revealed during her Budget statement at Holyrood on Tuesday 19 December that a new tax bracket of 45p per pound will be introduced in Scotland.
This new “advanced” tax bracket will be applicable to individuals with earnings ranging from £75,000 to £125,140.
Additionally the Scottish top tax rate for those earning above this threshold will increase by 1% next year reaching 48p per pound (from 47p in 23/24).
In terms of other tax rates the three lowest brackets will remain unchanged, while the starter and basic rate bands will be adjusted upwards to account for inflation.
By freezing the threshold for the higher tax band its expected that an additional 62,000 taxpayers will be pushed into the category of paying a tax rate of 42% or higher.
The announcement aims to address a funding shortfall of £1.5 billion in the Scottish budget.
According to Ms. Robison the tax increases for individuals with higher incomes will generate an additional £80 million in tax receipts for the Scottish government.
She told the chamber: “This is a government committed to equality through tackling poverty and protecting people from harm.
“At the heart of this budget is our social contract with the people of Scotland where those with the broadest shoulders are asked to contribute a little more.
“Where everyone can have access to universal services and entitlements – and those in need of an extra helping hand will receive targeted additional support.”
The changes announced should only have a meaningful effect for individuals earning £75,000 or more for example an income taxpayer from Scotland who earns £50,000 in both years can reportedly expect their take home pay to increase by around £10 in 2024-25 compared to 2023-24.
When will the new advanced tax rate start?
The new advanced tax rate in Scotland will start in the new tax year which begins on the 6 April 2024 and ends on 5 April 2025.
It’s implementation will result in an additional tax burden for approximately 154,000 individuals in Scotland.
These individuals who represent the highest earning 5% of Scottish taxpayers can expect to pay up to £1,881 more in income tax.
New Scottish tax rates and bands for the 2024/2025 tax year
There have been no alterations made to the starter, basic, intermediate and higher rates of tax.
The basic personal allowance will also remain unchanged staying at £12,571.
- Starter Rate (19%): £12,571 – £14,876
- Basic Rate (20%): £14,877 – £26,561
To maintain pace with inflation the Starter and Basic rate bands will be increased by 6.7%, which is based on the Consumer Price Index data from September 2023. This adjustment will ensure that these rate bands keep up with the rising cost of living.
- Intermediate Rate (21%): £26,562 – £43,662
- Higher Rate (42%): £43,663 – £75,000
- Advanced Rate (45%): £75,001 – £125,140
- Top Rate (48%): Above £125,140
To rate tax is increasing by 1 penny bringing it to 48 pence which is an increase of 1p from the 23/24 tax year.
