MSPs confirm Scottish income tax rates for 2023/24

It means the higher and top rates of income tax go up by 1p to 42p and 47p respectively.

The threshold for the higher rate is frozen at £43,663, while, as will happen south of the border, the threshold for the top rate comes down from £150,000 to £125,140.

Those earning £50,000 will pay around £1500 more in Scotland next year than they would elsewhere in the UK.

The vote coincided with a report from the Institute of Fiscal Studies (IFS) on the tax and benefit changes since more powers were devolved to Holyrood in 2017.

It found the changes had cut the average Scottish household income by £210 or 0.5 per cent a year.

However more generous devolved benefits meant that the poorest tenth of households have seen their incomes rise by £580 (4.6%) a year than in England and Wales.

The Scottish Child Payment and Best Start grants were key to this increase.

Meanwhile, the richest tenth of households saw their incomes fall by £2,590 (2.1%) a year.

IFS research economist Tom Wernham said: “The Scottish Government has used devolved income tax and benefit policy to make the system more progressive, as well as to raise more revenue to fund public services.

“These changes imply big increases in income for poorer households with children.

“But to fund their policies they are increasingly relying on taxing higher earners.

“With this group in particular, there is a risk that higher taxes will incentivise tax avoidance efforts, such as converting income into dividends – to which Scottish tax rates don’t apply – or even migrating across the border.

“Most of the additional revenue from raising the additional rate to 45p is set to be lost due to responses such as these – suggesting there is a limit to how much further this strategy can be pushed.

“If the Scottish Government does want to raise more revenue from richer households, it may need to turn to other taxes under its control, such as council tax.”

The SNP said the IFS report was “a compelling argument in favour of independence”.

MSP Kenneth Gibson said: “It’s gratifying to see the IFS recognising the fairer policies implemented by the SNP Scottish Government which are making a real difference to the lives of ordinary Scots.

“As the austerity-obsessed Westminster Government continues to hammer the most hard-pressed in society while dishing out billions of pounds in crony contracts to their mates, the SNP Scottish Government has again and again demonstrated its commitment to tackling child poverty and delivering progressive policies to benefit our poorest families.

“This is a compelling argument for independence.

“There is only so much we can do with the limited powers of devolution and a budget constrained under Westminster control.

“Only through independence can Scotland get rid of the Tories for good and build a fairer, more equal, more prosperous country so all of our citizens can reach our potential.”

A UK Government spokesman said the income tax system is highly progressive, with the top 50% of income taxpayers expected to pay around 92% of total income tax this year, while the bottom 25% are expected to pay just 2%.

The spokesman said: “Scotland is part of the UK, which has a progressive tax and welfare system that balances the need to support low-income households, incentivise people into work and manage the public finances responsibly.

“We have lifted millions of people out of paying tax altogether, while ensuring those who have the broadest shoulders also contribute the most.

“This has allowed us to uprate benefits and state pensions in line with inflation, as well as support millions of households with help worth £3,500 per household, on average.”

The full income tax rates and bands in Scotland for 2023/24 are:

Starter rate (19p) applies above the personal threshold of £12,570 up to £14,732

Basic rate (20p) applies from £14,733 to £25,688

Intermediate rate (21p) applies from £25,689 to £43,662

Higher rate (42p) applies from £43,663 to £125,140

Top rate (47p) applies above £125,140