Scottish Budget increases income tax on high earners

The Scottish Parliament has the power to set income tax rates on non-savings and non-dividend income for Scottish taxpayers. This is mainly employment income, self-employed profits and property income. Scottish taxpayers pay the same rates of tax as the rest of the UK on savings and dividend income.

In his Budget on 15 December 2022, the Scottish Finance Secretary, John Swinney, announced that income tax rates are to rise for anyone earning more than £43,662 a year so that higher rate taxpayers will pay 42p in the pound in 2023/24 and the threshold for Scottish top rate taxpayers will reduce from £150,000 to £125,140 in line with the rest of the UK. The top rate increases from 46% to 47% from 6 April 2023. See table below:

Scottish taxpayers (who live most of the time in Scotland) are given an S prefix PAYE code to ensure that they pay the right amount of tax on their employment income. It is important that HMRC are advised of their correct residential address so that the correct rate is applied.

Land and Buildings Transaction Tax Increased on Second Homes

The Scottish Parliament has also devolved power to levy tax on property transactions. Land And Buildings Transaction Tax (LBTT) is the Scottish Equivalent of Stamp Duty Land Tax (SDLT) that applies to property transactions in England and Northern Ireland (The Welsh Assembly also has its own version).

Like SDLT, an Additional Dwelling Supplement (ADS) is payable on most second homes. The ADS will increase from 4% to 6%, with effect from 16 December 2022, although the Supplementary Charge on second homes acquired in England and Northern Ireland has remained at 3%.

LBTT Rates and Bands for Residential Conveyances 2023/24: