Higher earners to pay more income tax

Higher earners in Scotland are to pay more income tax, the Scottish government has announced.

A new 45% band will be introduced for people earning between £75,000 and £125,140 – meaning they will pay more tax than they currently do.

The top rate of tax, paid by those earning more than £125,000, will also rise from 47% to 48%.

Finance Secretary Shona Robison confirmed the move as she unveiled the government’s budget for next year.

The changes mean Scotland will have six income tax bands while the rest of the UK has three, with higher earners in Scotland paying more than other parts of the country.

The Scottish government estimates that 114,000 people will pay the new advanced tax rate for those earning between £75,000 and £125,000, with a further 40,000 people paying the top rate for those earning more than £125,000.

They are designed to help plug a £1.5bn funding shortfall in the Scottish budget, with Ms Robison saying they would raise an additional £80m.

The finance secretary also confirmed the current thresholds for the higher and top bands – £43,663 and £125,140 respectively – would be frozen instead of rising with inflation.

She said this would generate an extra £307m through more people finding themselves in higher tax bands after being given pay rises.

Ms Robison told MSPs the Scottish government would provide local authorities with £140m in additional funding to help finance a council tax freeze.

Council umbrella body Cosla had called for £300m to cover the freeze, which was announced by First Minister Humza Yousaf in October.

Scotland now has six tax bands:

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

Other major announcements included the government’s intention to increase the Scottish Child Payment to £26.70 from April of next year.

Ms Robison also said the government would provide £1.5m to local authorities to cancel school meal debt.

According to research by the Aberlour children’s charity published in October, more than 30,000 children had debts worth a total of £1.8m – up by 60% on the previous year.

Funding for NHS boards will rise “above real terms” by £550m (4.3%) MSPs were told.

The deputy first minister announced business rates for premises valued at less than £51,000 will be frozen, while hospitality businesses in Scotland’s islands will be given 100% relief, capped at £110,000 per firm.

The small business bonus scheme will also continue while the government will assess how valuations for business rates are carried out, Ms Robison said.

The finance secretary said Holyrood’s block grant funding, derived from UK government spending decisions, had fallen by 1.2% in real terms since 2022-23.

“Devolution has brought many benefits, but it has also exposed quite how beholden we are to the decisions of Westminster,” she told MSPs.

“We are fighting Westminster austerity with one hand tied behind our back.”

Prime Minister Rishi Sunak said ahead of the budget announcement that the UK government was providing a record amount of funding via the Barnett formula to Scotland.

Speaking during a visit north of the border on Tuesday, he said Scotland was the highest taxed part of the UK and that it would be “very disappointing” to see tax rates rise further.

— Reports /TrainViral/