We explain how the upcoming income tax changes for people living in Scotland will affect you and your family.
Income tax is mostly a responsibility of the devolved Scottish Parliament. The tax-free personal allowance is set at Westminster, but the rates and bands of income tax are a matter for MSPs during the Budget process.
There are currently six rates of income tax in Scotland and three in the rest of the UK. The 2025/26 Budget, which was recently passed by Holyrood, will see no rises in the rates of tax.
But the freezing of some tax thresholds, known as ‘fiscal drag’, will see the bills of some income tax payers go up from April. The Record explains how the changes will affect you and your family from next month.
STARTER RATE
The first £12,570 of income is tax free as a result of the UK personal allowance. A starter rate of 19% applies to taxable income between £12,571 to £14,876 this year. This band will be widened in 2025/26 so that it covers £12,571 to £15,397.
SCOTTISH BASIC RATE
In 2024-25, a 20% rate applied to income earned between £14,877 to £26,561. A decision to uprate the bands means the 20% rate will apply to the £15,398 – £27,491 part of taxable income in the next financial year.
INTERMEDIATE RATE
In the current year, income between £26,562 to £43,662 is taxed at 21%. This banding will change to £27,492 to £43,662 from April, a decision that helps Scots on modest incomes.
HIGHER RATE
Taxable income between £43,663 to £75,000 is currently taxed at 42%. The Government opted to freeze the higher rate bands at both ends and some Scots will see their income tax bills increase if a pay rise takes them into this band.
ADVANCED RATE
Humza Yousaf’s Government introduced a 45% rate of taxable income between £75,001 to £125,140. The 2025/26 Budget kept this band at the same level and this process of fiscal drag will see some better-off Scots pay more if their earnings nudge over £75,001.
TOP RATE
In 2024/25, income over £125,140 was taxed at 48%. This threshold was not uprated in line with inflation in the Budget and bills will rise for some Scots if they earn over £125,140 for the first time next year.
POLITICAL REACTION
The SNP and Greens support the higher rates of income tax and argue that the cash raised is ploughed into public services and social security.
The Conservatives and Labour support the principle of reversing the tax rises.
To sign up to the Daily Record Politics newsletter, click here
