Devolved Scottish Government Increases Tax to Plug £1.5bn Gap

There is a £1.5bn funding shortfall in Scotland’s Budget and despite the Scottish National Party’s claim that it is due to the UK Chancellor’s spending cuts, it is not. The devolved Scottish Government manages its own health care and education budgets and gets similar grants as do the rest of the UK based upon a set formula.

For example, it is a fact that university education is free in Scotland for Scottish residents (unlike in England, Wales, Northern Ireland) and also assistance for means tested care fees is much greater with higher means test limits than the rest of the UK.  All this needs to be paid for (along with over budget items/failed ferries etc.) and there is a huge £1.5bn whole that needs to be plugged.

Currently there are 5 income tax bands for Scottish Income Tax as follows:

Income Tax Rates for Scotland (non savings and Non Dividend Income) for Tax Year 2023 over and above the personal allowance of £12,570.

• Starter Rate: 19.00% payable on next band of taxable income between £0 and £2,162 (gross income £12,571 - £14,732).
• Basic Rate: 20.00% payable on next band of taxable income between £2,163 and £13,118 (gross income £14,733 - £25,688).
• Intermediate Rate: 21.00% payable on next band of taxable income between £13,119 and £31,092 (gross income £25,689 - £43,662).
• Higher Rate: 42.00% payable on next band of taxable income between £31,093 and £125,140 (gross income £43,662 - £125,140).
• Top Rate: 47.00% payable on next band of taxable income in excess of £125,140 i.e., £125,141 and upwards.

But with effect from April 2024, there will be a new tax band, taking Scotland up to 6 bands (the rest of the UK has just 3 bands) of income tax as follows:

Income Tax Rates for Scotland (non savings and Non Dividend Income) for Tax Year 2024 over and above the personal allowance of £12,570.

• Starter Rate: 19.00% payable on next band of taxable income between £0 and £2,306.
• Basic Rate: 20.00% payable on next band of taxable income between £2,307 and £11,684.
• Intermediate Rate: 21.00% payable on next band of taxable income between £11,685 and £17,100.
• Higher Rate: 42.00% payable on next band of taxable income between £17,101 and £31,337.
• NEW Advanced Rate: 45.00% payable on next band of taxable income between £31,338 and £62,461.
• New Top Rate: 48.00% payable on next band of taxable income in excess of £62,461 i.e., total gross income of £125,141 and upwards.

or in other words when looking at gross income totals:

• Nil Rate (0%) £0 - £12,570.
• Starter rate (19%) £12,571 - £14,876.
• Basic rate (20%) £14,877 - £26,561.
• 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.

Comment

If we want better services, we all need to pay more taxes and this may prove extremely painful not just for the Scottih taxpayer but also the election chances of the current Scottish government.