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The Scottish Parliament Building at Holyrood
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Scottish Budget 2022/23: Steady as she goes

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The Scottish government has held income tax rates steady, but has increased the lower income thresholds which will benefit the lower paid to a small extent.

20th Dec 2021
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Financial secretary Kate Forbes presented the 2022/23 Scottish Budget to the Holyrood Parliament on 9 December 2021.

The enduring pandemic means that it is still far from business as usual for many Scottish businesses, and the Scottish Parliament is doing what it can to support Scotland’s economy to cope with the dual challenges of Brexit and inflation. 

Scottish income tax

Holyrood can only set income tax rates and thresholds in relation to the employment income, pensions and property income of Scottish taxpayers. Savings and dividend income of those taxpayers, plus capital gains, are all taxed at rates set by the UK government, which also sets all the NIC rates and thresholds, plus the new health and social care levy (from April 2024).

This can lead to some challenging tax computations for taxpayers with unusual combinations of income and gains.    

There have been no changes to the rates of Scottish income tax, and only the basic and intermediate rate thresholds have been increased in line with the consumer price index. The Scottish higher rate threshold has been frozen in a similar fashion the freezing of the higher rate threshold for the rest of the UK.

Income tax rates and thresholds 2022/23

Band Band name Rate
£12,570* to £14,732 Starter rate 19%
£14,732 to £25,688 Basic rate 20%
£25,688 to £43,662 Intermediate rate 21%
£43,662 to £150,000** Higher rate 41%
Over £150,000** Top rate 46%
 

*  Assumes entitlement to UK-wide personal allowance of £12,570.

** Earnings above £100,000 reduce personal allowance by £1 for every £2 excess.

Income tax divergence

The CIOT has calculated that Scottish taxpayers with income of more than £27,850 will pay more income tax than those resident in the rest of the UK. This is due to higher rates of Scottish income tax that apply to income above this level.

The converse is also true that Scottish residents on lower incomes pay marginally less income tax than if they lived in the rest of the UK, with a saving of approximately £21.62 per year.

Scottish taxpayers with employment income that falls between the Scottish and UK higher rate thresholds will pay a marginal rate of tax of 54.25% (income tax and NIC) on this portion of their income.

Employee in Scotland in 2022/23

Income in band

£

Scottish tax

%

NIC

%

Total rate on band

 %

0 – 9,880 0 0 0
9,880 – 12,570 0 13.25 13.25
12,571 – 14,732 19 13.25 32.25
14,733 – 25,688 20 13.25 33.25
25,689 – 43,662 21 13.25 34.25
43,663 – 50,270 41 13.25 54.25
50,271 – 100,000 41 3.25 44.25
100,001 – 125,140 61.5 3.25 64.75
125,141 – 150,000 41 3.25 44.25
Over 150,000 46 3.25 49.25

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By Hugo Fair
20th Dec 2021 16:28

Thanks, a useful summary of the voluminous https://www.gov.scot/publications/scottish-budget-2022-23/pages/3/
But I thought these were (technically) just the 2022/23 Scottish Budge *proposals* presented to Holyrood - so has the official Resolution by their Parliament now taken place?

Thanks (2)