Marginal tax rates - what to expect in 2024

On 19 December, Scottish Finance Secretary Shona Robison unveiled the Scottish Government’s 2024/25 budget plans in what she described as turbulent circumstances.

The key proposal had been widely speculated in the days before the Budget. Scottish taxpayers already face the highest income tax rates in the UK and the introduction of a new 45% ‘Advanced rate’ from 6 April on income between £75,000 and £125,140 will be a sore point.

What does this mean?

From April 2024 someone earning £100,000 is now set to pay £3,346 more in tax than someone earning the same amount south of the border, up from £2,606 before the announcement of the new rate.

For those earning more than £100,000, the position will be even worse with an effective rate of 67.5% on incomes between £100,000 to £125,140 due to the erosion of the personal allowance in this bracket, or 69.5% including the 2% National Insurance Contribution, compared to 60% and 62% in the rest of the UK.

Factor in employee’s superannuation which is 13.7% at the top rate and Scottish GPs (who are active members of the NHS pension scheme) earning between £100,000 and £125,140 will see only £22.96 net income for £100 of earnings in this bracket (assuming there are no student loan repayments).

Another pitfall to be aware of is loss of tax-free childcare allowances for those with adjusted net income over £100K. This is not tapered, so if you exceed the threshold you are not eligible for any allowances.

Get in touch

From a practical perspective, a sixth income tax band along with all the other potential deductions (student loans, loss of tax free childcare allowances) means it is more important than ever to understand your tax position. For assistance, please reach out to your usual healthcare contact.

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