By hayley - A central change is the freezing of higher, advanced, and top rate thresholds at £43,662, £75,000, and £125,140, respectively. This means those earning higher wages will continue to be taxed at increased rates, without adjustments for inflation.
On the other hand, the Scottish Government has increased the Starter rate band by 22.6% and the Basic rate band by 6.6%, which is well above inflation. This benefits lower-income earners, meaning over half of Scottish taxpayers will pay less than their counterparts in the rest of the UK. For small businesses, this may help employees take home slightly more pay, which could aid in employee retention and satisfaction.
For example: Based on current SFC forecasts, it’s estimated that taxpayers earning around £30,300 will pay slightly less Income Tax than they would elsewhere in the UK in 2025-26.
For payroll teams, this signals the need for precise tax calculations to ensure compliance. The importance rests on ensuring payroll systems are up to date with these new thresholds and rates. Mistakes could lead to compliance issues and penalties, particularly crucial for small businesses managing limited resources.
Payroll teams will need to closely monitor these tax adjustments, ensuring all changes are reflected correctly in their systems by the start of the tax year on 6 April 2025.
The 2025-2026 Scottish Budget brings both challenges and opportunities for businesses, with a clear focus on taxing higher earners while protecting lower-income households. Payroll accuracy will be key in navigating these changes efficiently.
Looking for guidance on what this means for your business, get in touch
Hayley