SNP Tax Rises: What Could the Future Hold for Scottish Taxes?

The Programme for Government published on 5 September by the Scottish Government has promised to deliver “the most progressive tax system in the UK.” This has led many to speculate about potential SNP tax rises in the next Scottish Budget. With the government signaling a commitment to progressive taxation, could further income tax increases be on the horizon for Scottish taxpayers?

No Decision Yet – But Could SNP Tax Rises Be Ahead?

The Cabinet Secretary for Finance, Shona Robison, outlined Scotland’s objectives for the coming year, including delivering sustainable Scottish public finances. First Minister Humza Yousaf also emphasised the expectation that the SNP will use their tax powers in the 2024-25 Budget to advance the goal of creating the most progressive tax system in the UK. This has fueled speculation that SNP tax rises might be imminent.

During the SNP leadership election, Yousaf pledged to introduce a new tax band between the higher and top rates, covering earnings between £43,662 and £125,140. The Institute for Public Policy Research analysed this proposal, assuming a new Income Tax rate of 45% for those earning above £58,285, which would represent a three-percentage-point increase. This could potentially generate an additional £260 million, helping to address Scotland’s £1bn shortfall in day-to-day spending plans. However, such SNP tax rises would likely be controversial among taxpayers.

The impact of the Scottish rate of Income Tax

Currently, anyone earning over £27,850 in Scotland already pays more tax than they would if they lived in England. Further SNP tax rises could be deeply unpopular at a time when household incomes are already under pressure. The Scottish Government’s decisions may be influenced by Westminster’s actions, especially after the UK government’s previous announcements regarding Income Tax changes, even though those were later reversed.

Higher Scottish Income Tax rates have drawn criticism from organizations like the Scottish Retail Consortium, who argue that they make it difficult to attract and retain staff, particularly highly paid senior employees. SNP tax rises might exacerbate these challenges, possibly leading to behavioral changes where higher earners seek to reduce their taxable earnings or relocate.

The table below compares the tax impact for a Scottish taxpayer with taxable earnings of £50,000, £100,000, or £150,000 against a UK taxpayer for the 2023/24 period:

These figures illustrate the significant difference that could be further widened by SNP tax rises.

Wealth taxes are not off the table

Another idea up for consideration by the Scottish Government may be the creation of a wealth tax. The Telegraph reported that Humza Yousaf as saying that ‘we shouldn’t rule wealth taxes off the table’ and cited a report by the Scottish Trade Union Congress, which discussed various options for increasing taxes in Scotland. This includes a wealth tax which could be based on the value of property, pensions and personal valuables such as paintings, jewellery and antiques.

As the devolved government does not have the authority to introduce new Scotland-wide taxes, any wealth tax would have to be created as a local tax. The Chartered Institute of Taxation cautioned that this could be ‘complex and costly’ and other options such as council tax reform may be an easier target. This was reiterated in Holyrood’s Finance and Public Administration Committee evidence session, held on 19 September with a group of economists and academics. The submission from Joao Sousa, the Fraser of Allander Institute’s deputy director, outlined that a wealth tax would be ‘very difficult not just in the context of devolution, but in terms of any realistic timeline for implementation.’

Introducing a new tax would require significant time for design and consultation- case in point being council tax, which the SNP pledged to abolish in their 2007 election manifesto. It remains based on property valuations from 1991 and if reform is intended to raise revenue, there is likely to be significant resistance. It’s therefore very unlikely that a wealth tax could be introduced in time for the next financial year, but with a Scottish Government spokesperson telling the Telegraph that the power to tax wealth should be devolved so that the ‘taxation of wealth could be redesigned to work effectively in a modern, Scottish-specific context’ this could be something to look out for in the future.

Other points to note

• Plans to give councils the power to double council tax on second homes will go ahead. Previously some second homes were entitled to a 50% discount, depending on the council, but legislation will be introduced to bring the charges in line with long-term empty properties and enable councils to apply up to a 100% premium.
• The Scottish Government will aim to introduce a devolved equivalent to the UK Aggregates Levy.
• It will also seek devolution of powers to introduce a Building Safety Levy, similar to a UK Government plan for England that will ensure residential developers remediate unsafe cladding.

Scottish Budget possibly delivered on 14 December

14 December is the likely date for the next Scottish Budget, following the UK Autumn Statement taking place on 22 November. Watch this space for more updates from our Private Client team! If you have any queries about the upcoming changes please do not hesitate to get in contact with Jill Walker or Fiona Rooney.