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Scotland's Record Tax Rates Delivered Britain's Slowest Income Tax Growth

ended 11. July 2026

Putting up a tax rate is not the same as raising more money, and the first full-year audit of Scotland's record-high income tax has just made the point. HMRC's final outturn figures, published on 9 July, show income tax on Scottish earnings, pensions and profits, the part Holyrood controls, raised £18.6bn in 2024-25, the first complete year of the six-band system with its 45% advanced rate and 48% top rate. That is growth of 9.0% on the year, against 10.1% across the rest of the UK, and Scotland's share of the UK pot slipped 0.1 percentage points to 6.7%, even though Scottish taxpayer numbers rose 3.9% to just over 3 million.

The same-day Welsh figures sharpen the contrast. Wales, which has never varied its rates from England's and where 88% of taxpayers pay only basic rate, grew its take by 11.2%, ahead of the 9.2% managed by the comparable rest-of-UK slice. None of this proves higher rates backfired: earnings mix, public sector pay and demographics all feed an outturn. But the catch is plain, and it lands just as these figures are signed off into the Scottish Government's block grant calculation: the tax base, who earns what and where, does the heavy lifting, not the headline rate. Left holding the question is the ordinary Scottish taxpayer, told that higher rates would fund better services, and now watching the pot grow more slowly than the rest of the UK's.

  1. Scotland has just run the experiment every government eyeing a rate rise wants the answer to: the highest income tax rates in Britain, and slower revenue growth than the rest of the UK. Is this the limit of rate rises showing up in the data, or is the gap being over-read?
  2. Who carries the cost when higher rates underdeliver: the middling earners who paid them, or the public services the revenue was meant to fund, and is that fair on either?
  3. What should ministers, in Holyrood and Westminster, take from Wales outgrowing the rest of the UK on unchanged rates? Do you have a client whose plans, or whose choice of where to live and work, the Scotland-England tax gap has changed? If so, please give as much colour and detail as possible.

2 responses from the Newspage community

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Editor
Harvey DhillonVerified
Founder & CEO at Zmartly
On HMRC's outturn figures published on 9 July, Scotland's record income tax rates raised £18.6bn in 2024-25, growth of 9% on the year, while the rest of the UK grew 10.1% and Wales, which has never varied its rates from England's, grew 11.2%. Rates decide the politics. The base decides the money. A gap like this does not prove people fled the 48% top rate: earnings mix, public sector pay and demographics all feed an outturn. But the highest rates in Britain did not buy the fastest growth, and Scotland's share of the UK pot slipped to 6.7% even with 3.9% more taxpayers. The people who feel it are the middling earners who paid the higher bills, and the services the money was meant to fund. If you work or run a business either side of the border, check which regime applies: Scottish rates follow your main home, and savings and dividends are still taxed at UK rates. Chase the rate without minding the base and you win the argument but lose the money.
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Tony RedondoVerified
Founder at Cosmos Currency Exchange
Over 50 years ago, Arthur Laffer showed both 0% and 100% tax rates yield zero revenue. If government’s push rates past the revenue-maximising point and people evade, emigrate or simply stop earning taxable income. Scotland's just proved it again. Despite 45% advanced and 48% top rates, its tax take grew only 9%, lagging the rest of the UK while funding tied to UK-wide performance triggers a steep negative reconciliation, squeezing both earners and public services. Wales, by contrast, matched Westminster's lower rates and saw revenue surge 11.2%. For Scottish firms, the tax gap is now driving restructuring, remote-work relocation and recruitment headaches. England's little better; Labour's business tax hikes have sparked a brain drain, with entrepreneurs decamping to Italy, Portugal, Dubai and the US.