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Sign up nowScottish and Welsh Budgets 2023: what do they mean for your money?
An extra income tax band for Scotland and university fee increases considered in Wales
A new 'advanced' income tax rate will be introduced for higher earners under proposals announced in the Scottish Budget today (19 December). Top rate taxpayers will also pay more and council tax will be frozen for two years.
The Draft Welsh Budget was published this morning as well, with the devolved government saying it is considering raising university tuition fees, dentistry fees and charges for care for the elderly in their own homes.
Here, Which? takes a closer look at both Budget announcements, and what it means for residents of Scotland and Wales.
What was in the Scottish Budget?
Deputy First Minister and Finance Secretary Shona Robison unveiled the plans at Holyrood, but they won't come into force until approved by the Scottish Parliament and Royal Assent is received.
The announcement comes amid warnings that Scotland faces a funding shortfall of around £1.5bn, with public spending watchdog Audit Scotland predicting the gap could widen to closer to £2bn over the next four years.
Here are the main changes announced in the 2024-25 fiscal plan today:
New higher-rate income tax band
The Scottish government has announced a new 45% 'advanced' income tax band on earnings between £75,000 and the upper rate threshold of £125,140.
Robison will also increase the top rate band - for those earning over £125,140 - by 1p to 48p in the pound.
The bands for the starter and basic rate will also be increased by inflation, but the threshold for paying the higher rate tax (42%) will be kept at £43,662.
The tables below show the proposed Scottish income tax rates and thresholds for 2024-25, compared to 2023-24.
| Tax band (2023-24) | Income threshold (2023-24) | Tax rate (2023-24) | Tax band (2024-25) | Income threshold (2024-25) | Tax rate (2024-25) |
|---|---|---|---|---|---|
| Starter rate | £12,571 - £14,732 | 19% | Starter rate | £12,571 - £14,876 | 19% |
| Basic rate | £14,733 - £25,688 | 20% | Basic rate | £14,877 - £26,561 | 20% |
| Intermediate rate | £25,689 - £43,662 | 21% | Intermediate rate | £26,562 - £43,662 | 21% |
| Higher rate | £43,663 - £125,140 | 42% | Higher rate | £43,663 - £75,000 | 42% |
| Top rate | More than £125,140 | 47% | Advanced rate | £75,001 - £125,140 | 45% |
| Top rate | More than £125,140 | 48% |
- Find out more: income tax in Scotland
Council tax freeze
Council tax rates in Scotland will be frozen at current levels until April 2025. It means 2.5 million households won't see bills rise for almost two years.
The freeze will be fully funded by the Scottish government and will be a welcome relief to millions of Scottish residents who saw council tax rates hiked in 2023-24. Unlike in England and Wales, Scotland didn't set a 5% cap on rate increases this financial year, so some councils were able to raise council tax by even more.
- Find out more: council tax calculator
Free school meals
Scottish children in primary 1 - 5 and pupils in special schools, will continue to receive free school meals. The government will also invest £43m in estate upgrades to the education sector which will help facilitate the rollout of free school meals for primary 6 and 7 schoolchildren.
In addition, the Scottish child payment - which aims to help households meet the costs of supporting a family - will be increased from £25 to £26.70 from April 2024.
Investment in transport
Robinson announced extra funding for public transport:
- £2.5bn for public transport, including more than £425m in bus services through the Network Support Grant, and concessionary travel schemes for under-22s, and older, and disabled people.
- £1.6bn for rail to support passenger rail services.
- £220m into the Active Travel Transformation Project, designed to encourage people to seek alternative means of transport, such as walking and cycling.
What was in the Draft Welsh Budget?
The Draft Welsh Budget outlined proposals that will affect the country's taxpayers in the next financial year. Finance Minister Rebecca Evans made the announcement in Senedd Cymru - the Welsh Parliament - today, saying health services and councils were the only two protected areas in the £23bn budget for the coming years.
She described it as the 'most stark and painful budget choices for Wales in the devolution era', claiming Wales' real-terms spending power had dropped by £1.3bn as a result of inflation since 2021.
So what changes were announced today?
No income tax rise
There will be no rise in income tax in the next financial year, the Welsh government has confirmed.
Income tax is partially devolved to Wales, and as a result, the Welsh government has the power to raise or cut the three income tax rates (basic, higher and additional).
All other aspects of the tax remain the responsibility of the Westminster government, and HMRC continues to administer income tax in Wales.
The process involves the Westminster government reducing each of the three UK income tax rates for Welsh taxpayers by 10p in the pound. The Welsh government can then choose if it wants to charge taxpayers in addition to this amount. However, as in previous years, it has chosen to add 10p in the pound, meaning Welsh taxpayers pay the same amount of income tax as those in England and Northern Ireland.
This means income tax rates for 2024-25 will be as below:
| Tax band | Earnings | Tax rate |
|---|---|---|
| Basic rate | £12,570 - £50,270 | 20% |
| Higher rate | £50,271 - £125,140 | 40% |
| Additional rate | More than £125,140 | 45% |
- Find out more: income tax in Wales
Land Transaction Tax (LTT) stays the same
Land Transaction Tax or LTT replaced Stamp Duty Land Tax (SDLT) in Wales in April 2018. Changes to LTT rates for home movers were introduced on 10 October 2022, raising the threshold at which people start paying the tax on residential properties from £180,000 to £225,000.
However, the Welsh government confirmed that there will be no change to LTT. Two consultations on the future of LTT will, however, be launched at a later date.
- Find out more: Land Transaction Tax - stamp duty in Wales
Charges for public services 'considered'
The Welsh government says it is 'carefully examining' whether it will raise fees for services such as NHS dental care, university tuition and domiciliary care, for the elderly in their homes.
The money raised through doing this would help fund other public services and higher education.
Rail fares could rise
The Welsh government has warned that due to inflationary pressures, the country has to make 'tough choices' and Transport for Wales will therefore need to increase rail fares to help close the funding gap.
Business rates rise
Business rate relief was increased from 50% to 75% in April 2023, but from April 2024 it will drop down to 40%. It means pubs, shops and restaurants will all be paying more tax in the spring.
The Welsh government says it will allow more money to be put into Wales' struggling health service.
What happens next?
If the Scottish government's draft Budget proposals are approved, they will come into force in April 2024.
The SNP and Scottish Green Party, which between them hold a majority of seats in the Scottish Parliament, are working together in government under the terms of the Bute House Agreement. The Budget has been developed in co-operation between the two parties, but other parties typically negotiate with the government to secure additional measures before the draft Budget is finalised.
The plans outlined in the Draft Welsh Budget will next need to be debated in Senedd Cymru - the Welsh Parliament - on 6 February 2024. A final budget will be published on 27 February 2024 and debated on 5 March 2024.
