New financial year heralds income tax changes

Changes to income tax in Scotland have come into force and are estimated to raise more than half a billion pounds of additional revenue this financial year to support vital public services.

The tax rates for earnings between £12,571 and £43,662 remain the same while earnings above £43,663 are now taxed at the Higher tax rate of 42%.

The threshold at which people pay the Top Rate of tax has reduced from £150,000 to £125,140 with earnings over that threshold now taxed at 47%.

According to the Scottish Fiscal Commission, these changes will raise £129 million in 2023-24.

The Higher Rate threshold will also remain at its 2022-23 level, applying to earnings over £43,662, which will increase revenue by a further £390 million when compared to uprating the threshold by inflation, according to Scottish Government estimates.

As the new financial year begins, Scottish taxpayers are also being encouraged to check if their tax code on their first payslip is correct – people paying Scottish Income Tax should have a tax code that starts with an S.

Deputy First Minister Shona Robison said:

“The decisions we have made on income tax are fair and progressive by ensuring that those who can, contribute more. They strengthen our social contract with the people of Scotland who will continue to enjoy many benefits not available in the rest of the UK such as free prescriptions.

“The additional revenue will help us invest in our vital public services including the NHS, above and beyond the funding received from the UK Government.  At the same time, the majority of taxpayers in Scotland will still be paying less income tax than if they lived in the rest of the UK.

“Now that the new financial year has started, I’d also encourage people to check that the tax code is correct on the first payslip they get. If you think your tax code is wrong, you can check your details with HMRC who will be able to help.”

Background

The new Scottish Income Tax bands and rates for the financial year 2023-24 are:

* Assumes individuals are in receipt of the standard Personal Allowance.

** Those earning more than £100,000 will see their Personal Allowance reduced by £1 for every £2 earned over £100,000.

The Personal Allowance threshold remains reserved and is set by the UK Government at the UK Budget.