Autumn Statement 2023 - How does this impact Scottish taxpayers?

The main headline from the Autumn Statement was the announcement that the Government will reduce National Insurance Contributions for both the employed and self-employed.

The good news for Scottish taxpayers is that National Insurance is not a devolved tax, therefore, these reductions apply equally to individuals across the UK, including Scotland.

What could the Scottish Budget bring?

However, this welcome change could potentially be short-lived. Since 6 April 2016 Scotland has had the power to set different rates of income tax and vary the tax bands. As a result, based on current tax rates, Scottish taxpayers earning more than £27,850 already pay more income tax than the rest of the UK.

The current, and possible future divergence, of the income tax burden on Scottish taxpayers from the rest of the UK could present further challenges for businesses in Scotland when trying to attract skilled labour and talent into Scotland, and also retaining existing talent in Scotland, especially for the younger employees and entrepreneurs who may see the higher tax rates in Scotland as a barrier.

The Scottish rates of income tax for the next tax year (2024/25) will not be set until after the Scottish Budget on 19 December 2023 so it remains to be seen whether the Scottish Government will take steps to further raise, or lower, the rate of tax in Scotland.

Therefore, whilst the reduction in National Insurance Contributions is good news, Scottish taxpayers will not know how their financial positions will be impacted until after the Scottish Budget.