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Scottish Budget 2023

8 min read 19 Dec 23

The Scottish Budget was delivered by Shona Robison who was appointed Deputy First Minister and Cabinet Secretary for Finance in March 2023.

What was announced?

  • There will be six tax bands in the Scottish Income tax system (currently there are five)
  • The new Advanced Rate of income of 45% will apply to income over £75,000
  • The Top Rate will increase by 1% to 48%

What does this mean for the planner?

  • Moving to six bands will add more complexity into the Scottish income tax system resulting in increased advice opportunities
  • The Scottish Fiscal Commission estimate that introducing the new 45% Advanced Rate band and increasing the Top Rate by 1% will raise an additional £82 million in 2024/25
  • The new Advanced Rate band will affect only the top 5% of Scottish taxpayers earning above £75,000
  • more tax relief will be available for those making tax relievable investments such as pensions

Background

Scottish income tax is only payable by Scottish taxpayers. 

There are a number of tests to determine Scottish taxpayer status, but for the vast majority of individuals, the question of whether or not they are a Scottish taxpayer is a simple one - they will either live in Scotland and thus be a Scottish taxpayer or live elsewhere in the UK and not be a Scottish taxpayer.  

Scottish income tax applies to non-savings, non-dividend income only (earnings, pension and most other taxable income). Scottish taxpayers pay the same tax as the rest of the UK on savings and dividends income.

Since 2017/18, the Scottish Parliament has had power to set income tax rates and limits applicable to non-savings and non-dividend income to those defined as Scottish taxpayers. 

2023/24 rates and bands

Band
 Income Range
 Rate
Starter Rate  Over £12,570* - £14,732 19%
Basic Rate
 Over £14,732 - £25,688
 20%
Intermediate Rate
 Over £25,688 - £43,662
 21%
Higher Rate
 Over £43,662 - £125,140
 42%
Top Rate
 Over £125,140**
 47%

2024/25 proposed rates and bands

Band Income Range Rate
Starter Rate  Over £12,570* - £14,876 19%
Basic Rate Over £14,876 - £26,561 20%
Intermediate Rate Over £26,561 - £43,662 21%
Higher Rate Over £43,662 - £75,000 42%
Advanced Rate  Over £75,001 – £125,140 45%
Top Rate
 Over £125,140 48%

*Assumes individual in receipt of the Standard Personal Allowance

**Personal Allowance reduced by £1 for every £2 of adjusted net income over £100,000 

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