Scotland’s New Tax Band to Heavily Affect High Earners 

Written by: Liez Comendador
Written by: Liez Comendador
Scotland’s New Tax Band

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Scotland’s deputy first minister and finance secretary Shona Robison announced on Tuesday the Scottish Budget Statement at Holyrood, which highlighted the new advanced rate of 45% to protect public services. This new tax band will take effect by 1 April 2024. Scotland will have six income tax bands in all, whilst the rest in the UK maintains three.  

The reform is set to help recompensate the £1.5bn funding deficit in the Scottish budget, which Shona attributed to failed projects. Scotland will be even harsher to higher earners “to prioritise support for those who need it the most. Scottish income tax will be as follows: 

  • Starter Rate (19%): Between £12,571 and £14,876 
  • Basic Rate (20%): Between £14,877 and £26,561 
  • Intermediate Rate (21%): Between £26,562 and £43,662 
  • Higher Rate (42%): Between £43,663 and £75,000 
  • Advanced Rate (45%): Between £75,001 and £125,140 
  • Top Rate (48%): More than £125,140 

The three lowest rates will remain the same (19%, 20%, 21%), with the first two bands (starter and basic rate) increasing in thresholds based on the inflation rate, projected by the OBR to be 3.6% on average by 2024. Higher and top rate thresholds will be frozen. This will mean another 62,000 Scots will be forced into the higher rate of 42% and onwards. 

LF Tax on Pension
  • NHS funding to increase by 4.3%, equivalent to £550m 
  • Police Scotland to receive over £1.5bn funding 
  • Business establishments valued less than £51,000 to have frozen rates 
  • Hospitality businesses to receive 100% relief 
  • Public transport to receive £2.5bn support 
  • Affordable housing to be funded £550m 

However, Shona firmly believes that “Devolution has brought many benefits, but it has also exposed quite how beholden we are to the decisions of Westminster. We are fighting Westminster austerity with one hand tied behind our back.” Hence, Scotland’s apparent deviation from the UK cutting taxes.  

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Reference:

Scottish Budget: Higher earners to pay more income tax. 20 December 2023. Retrieved from BBC: https://www.bbc.com/news/uk-scotland-scotland-politics-67759418 

Higher earners to be taxed more heavily in Scotland to protect public services. 20 December 2023. Retrieved from The Guardian: https://www.theguardian.com/uk-news/2023/dec/19/higher-earners-to-be-taxed-more-heavily-in-scotland-to-protect-public-services 

New 45% tax band for higher earners announced in Scottish Budget. 20 December 2023. Retrieved from Independent: https://www.independent.co.uk/business/new-45-tax-band-for-higher-earners-announced-in-scottish-budget-b2466631.html 

UK economic and fiscal outlook: summary. 17 December 2023. Retrieved from Scottish Government: https://www.gov.scot/publications/uk-economic-and-fiscal-outlook-summary/pages/uk-economic-outlook/#:~:text=The%20OBR%20UK%20forecasts%20show,the%202%25%20target%20in%202025 

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  • Junaid Usman

    Apart from being a partner at Legend Financial, Junaid is an expert on Business Tax including business management advisory services which has proven in the growth of company. He is a promising advisor with an ideology; "Any business success depends on the level of objectivity it maintains."

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