New 45% income tax band announced in Scotland for those earning over £75,000

The Scottish government is reportedly considering introducing a new tax level in a bid to plug a gap in its budget.

The new tax band will impact those earning more than £75,000 a year

The Fraser of Allander Institute (FAI) said the funding shortfall was around £1.5billion, between day-to-day spending commitments and capital projects.

But the group said adding a new 45 percent tax band for earnings over £75,000 would only raise around £60million for spending.

The highest rate levied on people earning more than £125,140 a year, will rise by one percent in 2024 to 48 percent.

The three lowest tax rates will not be raised, while the starter and basic bands will rise in line with inflation.

Finance Secretary Shona Robison confirmed the move as she unveiled the government’s budget for next year.

The changes mean Scotland will have six income tax bands while the rest of the UK has three.

Higher earners in Scotland will subsequently be paying more than other parts of the country.

Scotland now has six tax bands:

  • Starter rate (19 percent) £12,571 – £14,876
  • Basic rate (20 percent) £14,877 – £26,561
  • Intermediate rate (21 percent) £26,562 – £43,662
  • Higher rate (42 percent) £43,663 – £75,000
  • Advanced rate (45 percent) £75,001 – £125,140
  • Top rate (48 percent) Above £125,140

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The finance secretary also confirmed the current thresholds for the higher and top bands – £43,663 and £125,140 respectively – would be frozen instead of rising with inflation.

She said this would generate an extra £307million through more people finding themselves in higher tax bands after being given pay rises.

Ms Robinson said: “That’s why I will fund an above inflation five per cent council tax freeze – delivering over £140million of additional investment for local services.

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“Combined with the other support being provided to local government, this will increase their overall funding by six percent since the last budget, taking local government funding to a new record high of over £14billion.”

Prior to today’s announcement, there was widespread speculation that the SNP-led Scottish Government would introduce a new tax band.

The implementation of this rate comes as both Governments in Westminster and Holyrood attempt to address a huge squeeze in public finances.

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