The 2024 Scottish Budget has introduced notable changes to Income Tax, particularly impacting high earners.
The 2024 tax structure will maintain existing rates for incomes below £75,000. However, a new ‘advanced tax rate’ of 45 per cent will apply to earnings between £75,000 and £125,140. Additionally, incomes exceeding £125,140 will incur a ‘Top rate’ tax of 48p per pound.
Overview of 2024 Scottish Income Tax rates:
- Starter rate (£12,571 – £14,876) = 19 per cent
- Scottish basic rate (£14,877 – £26,561) = 20 per cent
- Intermediate rate (£26,562 – £43,662) = 21 per cent
- Higher rate (£43,663 – £75,000) = 42 per cent
- Advanced rate (£75,001 – £125,140) = 45 per cent
- Top rate (over £125,140) = 48 per cent
The personal allowance remains at £12,570, exempting earnings below this threshold from taxation.
For Earnings below £75,000:
The Scottish Government plans to adjust the starter and basic rate thresholds in line with inflation, while the higher rate threshold stays at £43,662.
The decision to freeze this threshold might result in more people falling into this higher tax band due to fiscal drag.
For Earnings between £75,000 and £125,140:
Individuals in this bracket will face the new 45 per cent ‘advanced tax rate’, necessitating careful financial planning and possibly revised tax strategies.
It is important to note that due to the tapering of the personal allowance, taxpayers earning between £100,000 and £125,140 face an effective rate of tax of 67.5 per cent.
For Earnings above £125,140:
Earnings above this level will be taxed at 48 per cent. This increase demands consideration of alternatives to salary, such as dividends, and exploration of tax-efficient savings and investments. Accountants can offer advice on tax reliefs and allowances to minimise taxable income.
Here to help you
The unchanged higher rate tax threshold could push more taxpayers into a higher bracket due to fiscal drag. The introduction of a new tax band and adjustments to the existing structure aims to generate more revenue but may have significant implications for those crossing into different brackets.
As accountants, we’re committed to guiding our clients through these changes, offering strategies for tax efficiency and liability reduction.
For concerns or discussions about your Income Tax situation, our team is ready to assist.
