Higher earners in Scotland are set to be hit with an income tax increase of over £1,000, as the Scottish Government unveils a draft Budget that mirrors a key 'stealth tax' strategy from Westminster.
Threshold Freeze Creates Fiscal Drag
Finance Secretary Shona Robison presented the Scottish National Party's financial plans on Tuesday 13 January 2026. While the thresholds for the basic and intermediate tax rates will rise, the higher rate threshold will remain frozen at £43,662. This decision, coupled with the UK Treasury's nationwide freeze until 2031, is expected to pull thousands more Scottish workers into the higher 42% tax bracket through a process known as fiscal drag.
The basic rate of 20% applies to income between £15,398 and £27,941. The intermediate rate of 21% is for earnings between £27,492 and £43,662. Under the new Budget, these thresholds will increase by 7.4% to £16,537 and £29,526 respectively from the next financial year. However, the higher, advanced, and top rate thresholds will stay at £43,662, £75,000, and £125,140.
"Not the Broadest Shoulders" Hit Hardest
Financial experts warn that the frozen threshold unfairly impacts professionals like nurses and teachers. Neil Winstanley, a chartered financial planner at Quilter Cheviot, stated: "These are not the 'broadest shoulders' traditionally associated with higher-rate tax, yet fiscal drag continues to push more ordinary earners into this bracket."
He acknowledged the political ease of the move ahead of an election but argued it does little to help public sector workers being pulled into higher taxation. The freeze means Scotland's higher rate threshold now lags behind the rest of the UK by roughly £7,000. For someone earning £50,000, this translates to around £1,500 more in annual tax, potentially harming Scotland's competitiveness for skilled workers.
Mansion Tax and Political Reactions
In a further move, Robison confirmed SNP ministers will introduce a new mansion tax, creating higher council tax bands for properties valued over £1 million. "To deliver even more for those with the least, we'll ask those with the most, the very wealthiest in our land, to contribute that little bit more," Robison said.
John O'Connell, chief executive of the Taxpayers' Alliance, criticised the approach, arguing Holyrood is "hammering Scots with new taxes" and taking "a leaf out of Westminster’s playbook." The draft Budget now awaits parliamentary approval, setting the stage for a heated debate on taxation and fairness in Scotland.
