- Everyone earning more than £43,662 in Scotland will have to pay more income tax next year.
- The higher rate of tax will increase from 41p to 42p in the pound, and the top rate from 46p to 47p.
- The tax threshold for the top rate will also be lowered from £150,000 to £125,140.
- Money will help fund pay demands for public sector workers.
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Scotland Raises Taxed For Middle And Top Income Earners
Middle and higher income earners will be feeling more of the pinch in Scotland with their tax rates increasing by an extra penny in the pound. The cost-of-living headwinds will be blowing that extra bit more harshly on those who pay the higher rates and top rates of tax. Instead of paying 41p in the pound for earners between £43,663 and £125,140, a 42p rate will now apply.
For those at the top of the income tax tree, the income tax rate will rise from 46p to 47p, but many more taxpayers on lower branches will now have to pay the top rate. Because the top rate threshold is being lowered to £125,140 from £150,000, it means anyone above that will have to pay 47p in the pound. This will represent a significant dent to incomes for many in the £125,140 to £150,000 bracket who will see the tax take rise by 6p in the pound in one fell swoop.
After the tax rate and threshold change, people earning £126,000 will have to pay £992.08 more per year. It’s a less onerous change for those on lower pay. Those who earn £45,000 a year will have to pay £13.38 more tax annually, while those earning £60,000 will have to pay £163.38 more per year.
They face a triple whammy of financial pain this week, with the latest reading on inflation showing it’s still running at the double digit of rate of 10.7% and interest rates rising by 0.5% today.
It will give the Scottish government some budget breathing room to try and limit the winter of discontent erupting across the public sector. But the potential pay awards on offer are, for now, being kept under wraps as negotiations continue.
Despite this redistribution of wealth, like in the rest of the UK, the poorest in Scottish society will still be bearing the brunt of the punishing price rises we are seeing, given that those on the lowest incomes are still having to spend the largest proportion of household money on essentials which have shot up in price.
Article by Susannah Streeter senior investment and markets analyst, Hargreaves Lansdown
