The Scottish Government has announced that budgetary gaps are to be plugged by a new income tax band, with this further supporting high-quality public services.
A 45% tax rate will be applied to annual income between £75,000 and £125,140, with this expected to raise £18.8 billion over the course of 2024-25. This estimate comes from the Scottish Fiscal Commission, which has also suggested that the new tax band will provide approximately £1.5 billion more in revenue than if the Scottish Government had followed the UK’s Income Tax policy.
Scottish Finance Secretary Shona Robison said:
“Managing the cumulative impacts of the UK Government’s disastrous Autumn Statement, high inflation and ongoing economic damage from Brexit means we have had to make difficult choice and prioritise support for those who need it the most.
“We are proud that Scotland has the most progressive Income Tax system in the UK, protecting those who earn less and asking those who earn more to contribute more. This in turn allows us to provide a more comprehensive set of services than in the rest of the UK.
“These targeted tax decisions are expected to increase our Income Tax revenue by £389m and have been carefully balanced with the needs of individuals, businesses and the wider economy while ensuring we continue to build upon our progressive approach to taxation.
“Our decisions on tax in this budget – included both Income Tax policy changes and the freeze in Council Tax – provide a net benefit to around 60% of Scottish households, with around 80% of households paying no more tax as a result of these measures.
“On non-domestic rates, the support I have outlined for businesses is estimated to be worth £685 million this year and ensures that over 95% of non-domestic properties continue to be liable for a lower property tax rate than anywhere else in the UK.”
Other measures that were mentioned include:
- The lowest poundage rate in the UK for a sixth year in a row, with a freeze keeping it at 49.8p. Alongside this, the Intermediate and Higher Property Rates are to increase in line with inflation to 54.5p and 55.9p respectively.
- A £110,000 per business cap on rates, with 100% relief being offered to hospitality businesses in island communities.
- Maintaining Land and Buildings Transaction Tax rates and bands at current levels.
- Increasing the standard and lower rates of Scottish Landfill Tax to support the nation’s ambitions for a circular economy.
Local authorities in Scotland are also to be supported to freeze council tax at current levels, with the allocation of £144 million.
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