Investment - Articles - Scottish Budget: tax load on high earners and homes over £1m

Sarah Coles, Head of Personal Finance, Hargreaves Lansdown: “The Scottish government is continuing to write its own rules when it comes to income tax. Taxes on lower earners continue to be marginally less painful, while pain is pushed onto the shoulders of higher earners.

Taxpayers enjoy key additional benefits north of the border – including free prescriptions and no tuition fees for Scottish students studying in Scotland. Income tax rates are also lower for those earning just enough to pay income tax.

The changes to income tax today will help ease the tax burden for those further down the income spectrum, because by increasing the thresholds faster than inflation, it will not only protect them from the horrors of fiscal drag, but it will ensure that some people on the cusp of a threshold will actually pay less tax. In fact, 55% of workers in Scotland will pay less tax than if they were living elsewhere in the UK.

However, the trade-off in Scotland has been higher taxes for those who earn more, The Scottish government is keen that those with the broadest shoulders carry the biggest burden, but the threshold freezes for higher earners pile more tax misery on an already hefty burden.

On top of this, it is adding two new council tax bands by 2028, so anyone living in a property in Scotland worth £1 million or more will pay more. This will only affect those in pricey properties, but for those who bought them at much lower prices – and now find themselves property rich and cash poor – it could make everyday life far more of a stretch.

Whenever tax changes kick in, it raises the question of whether it will be enough to persuade higher earners to leave Scotland. However, you don’t need to part with the attractions of life north of the border in order to pay less tax. Tax-free allowances including ISAs and SIPPs can play an essential role in keeping your tax bill down, rather than having to consider anything more drastic.”