Scottish Income Tax for 2025-26: An Overview of Potential Payments

The Scottish government’s Budget Statement confirmed no alterations to Scottish income tax rates or the introduction of new tax bands for the current year. Finance Secretary Shona Robison implemented adjustments to tax thresholds, stating that these changes would result in a larger portion of individuals’ earnings being taxed at reduced rates. She further indicated that this measure would lead to most Scottish residents incurring a lower income tax burden compared to those residing in other parts of the UK. Following these modifications, tax consultancy firm Deloitte has compiled illustrative examples covering various salary levels. For an individual earning a salary of £15,000 in 2025-26 with no additional income, the personal allowance of £12,570 will be subtracted, leaving £2,430 subject to taxation. For a Scottish resident, the income tax calculation is: Starter rate – £2,430 at 19% = £461.70. The total tax amounts to £461.70. This represents a £1.24 decrease in income tax compared to 2024-25, attributed to the inflationary adjustment of the starter rate band. If the same income were earned by a non-Scottish resident, the entire £2,430 would be taxed at 20% (the UK basic rate), resulting in an income tax liability of £486. Consequently, a Scottish resident would pay £24.30 less. For an individual with a salary of £33,000 in 2025-26 and no other income, the personal allowance of £12,570 will be subtracted, making £20,430 taxable. For a Scottish resident, the income tax breakdown is: Starter rate – £2,827 at 19% = £537.13; Scottish basic rate – £12,094 at 20% = £2,418.80; Intermediate rate – £5,509 at 21% = £1,156.89. The total tax due is £4,112.82. This represents a £14.51 decrease in income tax from 2024-25, attributed to the inflationary adjustments of the starter rate and basic rate bands. For residents elsewhere in the UK, the entire £20,430 would be subject to a 20% tax rate, resulting in an income tax liability of £4,086.00. A Scottish resident would, in this scenario, pay an additional £26.82 in income tax compared to a resident elsewhere in the UK. For an individual earning £50,000 in 2025-26 with no other income, the personal allowance of £12,570 will be subtracted, making £37,430 taxable. For a Scottish resident, the income tax is calculated as: Intermediate rate – £16,171 at 21% = £3,395.91; Scottish higher rate – £6,338 at 42% = £2,661.96. The total tax amounts to £9,013.80. This reflects a £14.51 reduction in income tax from 2024-25, due to the inflationary increase applied to the starter rate and basic rate bands. For residents elsewhere in the UK, the entire £37,430 would be taxed at 20%, resulting in an income tax liability of £7,486.00. A Scottish resident would incur an additional £1,527.80 in income tax compared to those living elsewhere in the UK. This difference could be particularly noticeable for employees in Scotland earning between £43,662 and £50,270, who face an effective marginal tax rate of 50% when national insurance is included, in contrast to 28% in the remainder of the UK. For an individual earning a salary of £110,000 in 2025-26 with no other income, a reduced personal allowance of £7,570 applies because the income surpasses £100,000. Consequently, the taxable income is £102,430. For a Scottish resident, the income tax breakdown is: Scottish higher rate – £31,338 at 42% = £13,161.96; Scottish advanced rate – £40,000 at 45% = £18,000.00. The total tax amounts to £37,513.80. This represents a £14.51 reduction in income tax compared to 2024-25, attributed to the inflationary increases applied to the starter rate and basic rate bands. While the advanced rate of 45% is the highest headline rate at this income bracket, the marginal income tax rate for earnings between £100,000 and £125,140 reaches 67.5% (69.5% when national insurance is included) because of the tapering of the personal allowance. For a resident elsewhere in the UK, this salary would incur a tax payment of £33,432.00, which is £4,081.80 less than what would be paid in Scotland. For an individual earning a salary of £200,000 in 2025-26 with no other income, no personal allowance is applicable as the income exceeds £125,140. Consequently, the taxable income is £200,000. The tax calculation is: Scottish advanced rate – £62,710 at 45% = £28,219.50; Top rate – £74,860 at 48% = £35,932.80. The total tax amounts to £83,666.10. This represents a £14.51 reduction in income tax due to inflationary adjustments to the starter rate and basic rate bands. For a resident elsewhere in the UK, this salary would result in a tax payment of £76,203.00, which is £7,463.10 less than what would be paid in Scotland. Garry Tetley, Tax Partner at Deloitte, stated: “There were no increases in Scottish income tax rates or new tax bands this year. “Inflationary adjustments in the lower rate bands will result in small tax savings of up to £14.51 for taxpayers at all levels, but wage inflation will push many taxpayers into higher rate bands.” He continued: “While the starter rate band will increase by 22.6% and the basic rate band will increase by 6.6%, the higher rate threshold remains at £43,662 for a fifth year running. “This is still significantly lower than the UK higher rate threshold of £50,270 which has been frozen until 2027/28. “Employees earning between these thresholds also pay 8% national insurance, which results in a combined marginal tax rate of 50% in this income bracket for those living in Scotland. “The advanced rate (45%) threshold and the top rate (48%) threshold are also frozen at £75,000 and £125,140, respectively.” Tetley added: “Lower earners in Scotland continue to pay less tax than those in the rest of the UK (the maximum saving is £28.27); the breakeven point for 2025/26 is £30,318.” He further explained: “The Scottish government’s devolved powers for personal taxes are limited to setting the bands and rates of income tax for non-savings non-dividend income, such as salaries, profits and pensions. “Income tax on savings and dividend income, capital gains tax and national insurance are all set by the Westminster government. “Most of these rates and thresholds are the same in 2024/25 and 2025/26, with the exception of employer’s national insurance and certain capital gains.” Tetley concluded: “The commitment (for the rest of the Parliament) not to introduce any new bands or increase the rates of Scottish Income Tax and uprate the starter and basic rate bands by at least inflation provides stability. “However, the continued divergence from the rest of the UK means that top talent earning higher salaries will continue to face higher tax bills in Scotland.”