THE Scottish Government has announced the creation of a new higher-rate income tax bracket in Scotland to help plug a £1.5 billion funding gap.
The proposal, which will need to be approved by MSPs, would see a new bracket implemented across the country.
Speaking of the plan, Finance Secretary Shona Robison said that the budget proposals were coming amidst some of the most challenging financial conditions experienced in Scotland's devolved history.
However, some criticisms have been levied at the plan,s with leading fiscal think tank Fraser of Allander Institute (FAI) warning that the new tax band may only raise £60 million.
Deputy First Minister @ShonaRobisonMSP presents #ScotBudget to @ScotParl today. This budget prioritises: 🔵protecting public services 🔵funding key missions on equality, opportunity, community 🔵investing in services and infrastructure Watch at https://t.co/zWDxp2N6pM pic.twitter.com/sH8RJHBniN
— Scottish Government (@scotgov) December 19, 2023
How will the new higher-rate tax bracket in Scotland work and who has to pay it?
The new tax bracket being proposed by the Scottish Government would see earnings between £75,001 and £125,140 charged at 45%. This is three points higher than now.
Currently, earnings between £43,663 and £125,140 are taxed at 42%.
Today, the Deputy First Minister will announce the #ScotBudget at @ScotParl. We are prioritising funding to invest in public services and support our key missions of equality, community and opportunity. @ShonaRobison visited @LarderTraining ahead of today's budget. pic.twitter.com/xtfVcFsoGp
— Scottish Government (@scotgov) December 19, 2023
What is my tax bracket currently?
According to the Scottish Government website, there are five tax brackets in Scotland, earnings up to £12,570 not taxed.
Income between £12,571 and £14,732 is taxed at 19%, while income between £14,732 and £25,688 is taxed at 20%.
The intermediate rate (£25,689 to £43,662) is set at 21%, and the higher rate (£43,663 to £125,140) is 42%.
Those on the current highest bracket pay 47%, with this only being applicable to those earning over £125,140.
What will the new Scottish tax brackets be?
The new system will see a sixth tax band created. This will charge a rate of 45% for earnings between £75,001 and £125,140.
This highest tax band, for earnings over £125,140, will rise from 47% to 48%.
The three lowest bands will see no increase to their rates, while the starter and basic rate bands will increase by the level of inflation.
The tax bands will be:
- Starter rate: £12,571 - £14,876, taxed at 19%
- Basic rate: £14,877 - £26,561, taxed at 20%
- Intermediate rate: £26,562 - £43,662, taxed at 21%
- Higher rate: £43,663 - £75,000, taxed at 42%
- Advanced rate: £75,001 - £125,140, taxed at 45%
- Top rate: Above £125,140, taxed at 48%
Do people in Scotland pay higher tax than elsewhere in the UK?
According to the Scottish Government, the tax changes mean that the majority of Scots will pay less tax than if they lived elsewhere in the UK.
Those earning less than around £28,850 – which is 51% of Scottish taxpayers (1.53 million people) – will continue to pay slightly less income tax in 2024-25 than if they lived elsewhere in the UK, the Government briefed.
