Income tax rates in Scotland will be frozen until at least the end of this Parliament, the Finance Secretary has pledged.
Shona Robison also announced that the basic and intermediate rate thresholds will be frozen – pulling more Scots into lower tax bands.
Announcing her budget at Holyrood, she promised a freeze on further income tax bands.
She said Wednesday’s decision means that the majority of people in Scotland will pay less income tax than those in the rest of the UK.
📣 @ShonaRobison: “While the UK Gov't froze all income tax thresholds, in Scotland, the basic and intermediate rate thresholds will increase this year by 3.5%.
— The SNP (@theSNP) December 4, 2024
This means the majority of taxpayers in Scotland will continue to pay less income tax than in the rest of the UK.” pic.twitter.com/B3RRgCnomY
Changes introduced by the Scottish Government in recent years mean people in Scotland begin paying more in tax after earning more than £28,800 a year.
The tax difference with England, Wales and Northern Ireland increases significantly on earnings of more than £50,000 a year.
The SNP has also introduced additional tax bands since 2017.
That, alongside the freezing of tax thresholds, saw the levels of tax between Scotland and the rest of the UK diverge significantly.
Setting out our plans now for the rest of this parliament will provide certainty, allowing taxpayers to better manage their finances and businesses to plan and make investment decisions with confidence
If confirmed by MSPs, the changes in the budget for 2025-26 mean the basic and intermediate rate thresholds will increase by 3.5% to £15,397 and £27,491 respectively.
The higher, advanced and top rate thresholds will be maintained at £43,662, £75,000 and £125,140 respectively.
The Finance Secretary said her tax plans will provide certainty to workers across Scotland.
She told MSPs: “I have decided to provide tax support for low and medium-income earners.
“The basic and intermediate rate thresholds will increase this year by 3.5%, effectively twice the rate of inflation.
“That means more of people’s money will be taxed at the starter and basic rates.
“It also means that the majority of taxpayers in Scotland will continue to pay less income tax than in the rest of the UK.
“This will remain true until at least the end of this Parliament while, as with the UK, thresholds for higher, advanced and top rates will be maintained at their current levels.”
With this budget also including a dazzling array of spending pledges, there will rightly be concern about the impact of the fiscal measures on the already fragile public finances
Ms Robison said decisions to increase tax among middle and high earners means that Scotland will see an additional £1.7 billion in its budget.
She added: “Setting out our plans now for the rest of this Parliament will provide certainty, allowing taxpayers to better manage their finances and businesses to plan and make investment decisions with confidence.”
According to the Independent Institute for Fiscal Studies, Scotland’s top rate of income tax may have reduced revenues for the Government, although it admitted uncertainty over the exact figure.
Tory MSP Craig Hoy said the budget will continue to make Scotland the highest taxed part of the UK.
He asked Ms Robison at Holyrood: “Why hasn’t the Government listened to those who warned that Scotland’s high tax regime and high tax rates are hitting growth?
“Why didn’t the Government, rather than just tinkering with thresholds, take up the option of reversing its damaging tax increases?
“And why didn’t the minister come to this chamber and admit what everyone else in Scotland can see – that the SNP’s experiment of hitting Scotland with higher taxes has monumentally failed?”
The Finance Secretary repeated that most Scots will continue to pay less in tax than those elsewhere in the UK. Tory calls for tax cuts would mean less money for public services like the NHS, she added.
Darwin Friend, head of research of the TaxPayers’ Alliance, said: “Taxpayers across Scotland will warmly welcome the lifting of tax thresholds, even if this won’t benefit all Scots.
“But with this budget also including a dazzling array of spending pledges, there will rightly be concern about the impact of the fiscal measures on the already fragile public finances.
“Scottish ministers need to ensure that this spending binge is accompanied with meaningful reform of public services.”
