Tax Revenue Collection and Social Security Contributions
The UK government and the Scottish Parliament have announced updates to the income tax bands for the next few years, aiming to ensure the sustainability of public finances and fund vital public services in a fair and sustainable way.
From 2020-2021 to 2025-2026, the UK government will maintain the Personal Allowance and higher rate threshold at £12,570 and £50,270 respectively. This means that the highest-earning households will continue to contribute more. However, it's important to note that the income tax bands for 2022 to 2023, 2024 to 2025, and 2025 to 2026 are not specified in the provided paragraph.
For Scottish taxpayers, the income tax bands are distinct due to the Scottish Parliament setting rates and thresholds for non-savings, non-dividend (NSND) income since 2017-2018. The Personal Allowance remains consistent across the UK, set by the UK government.
Here's a summary of the Scottish income tax bands including the relevant Scottish Parliament-set bands from tax year 2020-2021 through to 2025-2026:
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### Overview of Scottish Income Tax Bands (NSND Income) 2020-2021 to 2025-2026
- **Scottish Parliament powers:** Since 2017-2018, the Scottish Parliament controls the rates and thresholds for NSND income tax in Scotland.
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### 2020-2021 to 2021-2022 (approximate, prior to 2022 update) - The rates included: - Starter rate: 19% on income between approx. £2,085 and around £12,500 - Basic rate: 20% - Intermediate rate: 21% - Higher rate: 41% - Top rate: 46%
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### Changes from 2022 to 2023 onwards:
- The Scottish Government maintained some thresholds frozen at 2021-2022 levels. - The Personal Allowance remained frozen from 2021-2022 levels. - Introduction of a new **advanced rate band** at 45%, applied to NSND income above £75,000, with the advanced rate limit set at £125,140. - The top rate of Income Tax for Scottish NSND income was increased to **48%** for the highest earners. - The starter rate and basic rate limits were increased by CPI (inflation) indexation. - Higher rate and intermediate rate limits largely frozen.
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### 2025-2026 Income Tax Bands for Scottish NSND Income (Detailed)
| Band | Income Range (£) | Tax Rate (%) | |-------------------|-------------------------------|--------------| | Personal Allowance | Up to £12,570 (UK-wide) | 0% | | Starter rate | £12,571 to £14,876 | 19% | | Basic rate | £14,877 to £26,561 | 20% | | Intermediate rate| £26,562 to £43,662 | 21% | | Higher rate | £43,663 to £75,000 | 41% | | Advanced rate | £75,001 to £125,140 | 45% | | Top rate | Over £125,140 | 48% |
- The **Personal Allowance** is set by the UK government and remains frozen at around £12,570 since 2021-2022. - The introduction of the **advanced rate (45%)** in 2024-2025 reclassified some taxpayers as additional rate taxpayers[2][4]. - The additional (top) rate of 48% applies to NSND income above £125,140 for Scottish taxpayers[2].
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### Summary points: - The Scottish Parliament has distinct income tax bands for NSND income starting from 2017-2018. - Rates have been adjusted and new bands introduced since 2022, including the advanced rate at 45% and a top rate of 48%. - Thresholds have been indexed by CPI inflation in recent years but some thresholds remain frozen. - Personal Allowance remains consistent across the UK, set by the UK government.
This shows that Scottish taxpayers face a more complex income tax structure with additional bands compared to the rest of the UK, with the latest changes effective for 2025-2026 including the advanced and top rates at 45% and 48%, respectively[2][4]. It's also worth noting that the National Insurance Contributions (NICs) Upper Earnings Limit and Upper Profits Limit apply across the UK, while the income tax bands and thresholds for NSND income for Scottish taxpayers are set by the Scottish Parliament.
The income tax bands for 2022 to 2023 are not specified in the provided paragraph, but the additional rate threshold is fixed at £150,000 for 2022-2026. This decision will not reduce take-home pay.
In relation to business finance, the unique income tax structure for Scottish taxpayers, managed by the Scottish Parliament, features distinct rates and thresholds for non-savings, non-dividend (NSND) income since 2017-2018. As for the broader UK finances, the government has maintained the Personal Allowance and higher rate threshold at £12,570 and £50,270 respectively from 2020-2021 to 2025-2026, contributing to the sustainability of public finances and the funding of vital public services in a fair and sustainable way.
