Everything you need to know about the Scottish Budget 2024/25
Scotland’s deputy first minister and finance secretary Shona Robison has unveiled the Scottish Budget 2024/25. Read on to discover the key announcements and how they could affect your finances, including your Income Tax bill.
The Budget report starts by saying it’ll prioritise “what really matters”, including supporting people through the cost of living crisis and investing in frontline public services. However, the government had to tackle significant challenges with a £1.5 billion funding shortfall.
The Scottish Budget comes just weeks after chancellor Jeremey Hunt gave the Autumn Statement, in which he announced cuts to National Insurance rates and a freeze on Income Tax thresholds and rates.
Robison said: “The chancellor had the opportunity to invest £27 billion in core public services and critical national infrastructure. Instead, the UK government has chosen to double down on its failed policy of austerity, prioritising tax cuts for the wealthy in advance of the coming general election.”
So, it’s no surprise that the Scottish National Party has opted to increase the tax burden on high earners through changes to Income Tax rates and thresholds.
A new “advanced” Income Tax band will be introduced in April 2024
From 6 April 2024, there will be a new “advanced” Income Tax band.
Earnings between £75,001 and £125,140 will be taxed at a rate of 45%. This new band will affect the top 5% of Scottish taxpayers, according to the government. So, for the 2024/25 tax year, your Income Tax liability could be higher than anticipated.
Indeed, data from the Institute for Fiscal Studies (IFS) suggests that high earners in Scotland could face a heftier bill than elsewhere in the UK. In 2024/25, a Scottish taxpayer earning:
- £125,000 will pay an extra £5,221
- £50,000 will pay an extra £1,542.
In contrast, those with incomes below £29,000 a year pay slightly less tax in Scotland than they would in the rest of the UK.
The top rate of Income Tax will rise to 48%
In addition to the new advanced rate, the top rate of Income Tax will rise from 47% to 48%. So, if you earn more than £125,140 a year, your tax liability could be affected by both of these announcements.
This combination of the introduction of the advanced tax rate and increasing the top rate is forecast to boost government finances by £82 million in 2024/25 alone.
The thresholds for paying starter- and basic-rate Income Tax will rise
To reflect inflation, the thresholds for paying starter- and basic-rate tax will increase to £14,876 and £26,561 respectively.
However, the same cannot be said for the remaining tax bands – the thresholds will be frozen for the upcoming tax year. So, if your income rises in line with inflation, you could find yourself pushed into a higher tax band.
In fact, the Scottish government estimates that freezing the higher-rate threshold will boost its coffers by £307 million in 2024/25.
With these changes in mind, the Income Tax rates and thresholds for 2024/25 are:
| Income Tax band | Income Tax rate | |
| Starter | £12,571 – £14,876 | 19% |
| Basic | £14,877 – £26,561 | 20% |
| Intermediate | £26,562 – £43,662 | 21% |
| Higher | £43,663 – £75,000 | 42% |
| Advanced | £75,001 – £125,140 | 45% |
| Top | Above £125,140 | 48% |
Before the new tax year starts, it may be worth reviewing your Income Tax liability and how it could change from April 2024. There may be steps you could take to reduce your Income Tax bill; please contact us if you’d like to arrange a meeting.
Other measures from the Scottish Budget 2024/25
While the changes to Income Tax policy grabbed the headlines, other key changes might affect your finances too, including these:
- Business owners may benefit from rates (for premises that are valued at less than £51,000) remaining the same in 2024/25. The freeze is predicted to save firms £37 million compared to an inflationary increase.
- Hospitality businesses located on the Scottish Islands may also receive a 100% relief (capped at £110,000)
- The government will “fully fund” a Council Tax freeze in 2024/25 by providing councils with additional funding.
On the spending side, rather than publishing plans that cover the medium term as expected, the government opted to share its plans for 2024/25 only.
The IFS report notes that funding for health and social care is set to grow by just 1.3% in real terms as the government prioritised other areas. For instance, the education and skills portfolio will receive a boost of 2.6% in real terms, and the justice portfolio will benefit from a 9.1% rise in funding.
Some areas will also see a real-terms fall in day-to-day funding. The fair work and energy portfolio is set to experience a fall of 8.8%, while the rural affairs, land reform, and islands portfolio will see its budget decrease by 4.2% in real terms.
Contact us to talk about your finances
If you’d like to talk about how the Scottish Budget 2024/25 may affect your finances, please get in touch. We can arrange a meeting to discuss your circumstances and goals.
Please note: Information is from the Scottish Budget: 2024 to 2025 report.
The content of this Scottish Budget summary is intended for general information purposes only. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice.
While we believe this interpretation to be correct, it cannot be guaranteed and we cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained within this summary. Please obtain professional advice before entering into or altering any new arrangement.
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