Income tax hikes ‘offset’ by reduced NI rates

SCOTTISH tax increases will be offset by UK-wide cuts to national insurance, experts have said.

The divergence means Scots earning up to £112,900 will pay less combined compared to the previous year.

An estimated 49% of taxpayers in Scotland will pay more from today than workers in England.

From today, the Scottish Government’s advanced tax band comes into effect, with a 45% rate applying to those earning between £75,000 and £125,140 – meaning higher earners will pay up to £5,232 more than elsewhere in the UK.

The starter, basic and intermediate thresholds will also increase with inflation, meaning the level at which Scottish taxpayers begin to pay more income tax than those in the rest of the UK increases from £27,850 to £28,867 – £23 less than elsewhere.

But Chancellor Jeremy Hunt’s decision to cut national insurance instead of income tax in his Budget affects taxpayers across the UK, with the rate set to fall from 10% to 8%.

Data from the Chartered Institute of Taxation (CIOT) shows Scots earning under £125,140 will pay at least £580 less in tax in 2024-25, due to the combination of income tax and national insurance changes.

CIOT chairman Sean Cockburn said: “Although the Scottish Government’s tax choices will result in higher earning Scots paying more income tax, these have been somewhat offset by the UK-wide national insurance changes.

“It means that while Scots with earnings above £75,000 will pay more income tax, those with earnings under £112,900 will actually be paying less in tax and national insurance overall.”

Finance Secretary Shona Robison said the country has the “most progressive income tax system in the UK”.

A UK Government spokesman said: “The second successive record national insurance cuts will put over £830 a year on average back into the pockets of over 2.4 million hard-working people in Scotland.”