In the 2023 Scottish Budget, the Scottish Government announced a new income tax rate that will be applied to taxpayers in Scotland. This rate will create an additional tax band and will have a direct impact on higher earning individuals living and working in Scotland. Here, we provide an overview of the new tax rate and its impact on Scottish taxpayers.
The Announcement
Finance Secretary Shona Robison presented the draft Scottish Budget in the Parliament on 19th December. After much speculation, the announcement confirmed there would be the introduction of a new tax rate with a new tax threshold in April 2024.
The ‘Scottish Advanced’ rate of 45% will apply to earnings between £75,000 and £125,140 for taxpayers in receipt of the personal allowance. However, the new Advanced rate band is expected to only affect the top 5% of Scottish taxpayers earning above £75,000.
Shona Robison also announced an increase to the top rate of income tax payable by Scottish earners; this increases by 1p to 48p in the pound (48%).
The bands for the Scottish Starter and Scottish Basic rate will increase in line with inflation.
The introduction of the new tax band means Scotland now has six tax bands, while the rest of the UK has three.
As of the 2024/25 tax year, the rates payable by Scottish taxpayers will be as follows:
| Band | Rate | Threshold (£) |
| Scottish Starter | 19% | 12,571–14,876 |
| Scottish Basic | 20% | 14,877–26,561 |
| Scottish Intermediate | 21% | 26,562–43,662 |
| Scottish Higher | 42% | 43,663–75,000 |
| Scottish Advanced | 45% | 75,001–125,140 |
| Scottish Top | 48% | Over 125,140 |
It should be noted that Scottish taxpayers only pay tax at the above rates and thresholds for non-savings and non-dividend (NSND) income. Any income tax that is payable on dividends or savings remain at the UK-wide rates.
The introduction of the new rate could be seen as complicating an already over-complicated system compared to the rest of the UK. When making a direct comparison between the taxable rates and thresholds that apply to Scottish taxpayers, the rates applicable in Scotland are higher for higher earners than in the rest of the UK. This is despite the fact that those north of the border may in fact work for the same employer and do the same type of job.
As with any change to taxation, individuals will need to consider their personal circumstances.
If you believe these changes may affect you, please consult your financial adviser to understand the implications of the change and how it may impact your personal financial situation.