Scottish Budget: An increase in income tax for those with higher incomes

Scottish Budget An increase in income tax for those with higher incomes

Scottish Budget: An increase in income tax for those with higher incomes

A greater proportion of Scotland’s higher-income citizens will be required to pay income tax, the Scottish government has declared.

Individuals earning £75,000 to £125,140 will be subject to a 45% tax band, which will increase their current tax liability. Individuals earning over £125,000 will be subject to the highest tax rate, which will increase from 47% to 48% according to sources.

Furthermore, the existing payment threshold for the highest band, which is currently £43,663, will remain stagnant rather than increasing in tandem with inflation.

As she unveiled the government’s budget for the following year, Finance Secretary Shona Robison confirmed the decision. The budget included increases in funding for the health service and councils, the latter to help offset a freeze in council tax, but decreases in funding for enterprise, housing, and rural affairs.

As a result of the tax adjustments, Scotland will have six income tax bands as opposed to the three in the rest of the United Kingdom; those with middle and high incomes will be required to pay more in Scotland than in other regions.

According to the Scottish government, an additional 40,000 individuals will be subject to the highest rate of taxation for those earning over £125,000, while an additional 114,000 will be subject to the new advanced tax rate for those earning between £75,000 and £125,000.

The purpose of the announcement is to assist in filling a funding shortfall of £1.5 billion in the Scottish budget. Ms. Robison stated that the tax increases for higher earnings would generate an extra £80 million.

The finance secretary additionally affirmed that the existing thresholds for the upper and middle bands, amounting to £43,663 and £125,140 correspondingly, would remain unchanged. However, the rates at which the basic and intermediate bands become applicable will increase in tandem with the inflation rate.

Ms. Robison informed MSPs that the Scottish government would contribute an additional £140 million to local governments to assist in financing a council tax moratorium.

Cosla, an umbrella organisation for local governments, had requested £300 million to cover the freeze, which was declared in October by First Minister Humza Yousaf. A report released last week by Cosla warned that it was “only a matter of time” before a council went bankrupt.

Campaigners had demanded an increase to £30 per week, and the director of the Child Poverty Action Group, John Dickie, described the budget proposal as “extremely disheartening.” Aside from that, Ms. Robison stated that the government would reimburse local governments £1.5 million in school meal debt.

The funding for NHS boards will increase by £550 million (4.3 percent) “above actual terms,” according to information provided to MSPs.

Ms. Robison added that the small business incentive programme will continue during the government’s evaluation of the methodology used to calculate business rate valuations. Since 2022-23, Holyrood’s block grant funding, which is derived from UK government expenditure decisions, has decreased by 1.2% in real terms, according to the finance secretary.

Prime Minister Rishi Sunak stated prior to the budget announcement that the United Kingdom was providing Scotland with an unprecedented quantity of funding through the Barnett formula.