Our estimates show that if Scottish policy follows the rUK policy of freezing income tax thresholds the number of taxpayers subject to the Scottish higher rate and additional rate of tax will top 550,000 in the next parliament. If the Scottish Government chooses to increase thresholds in line with inflation, the median Scottish income taxpayer would pay around £195 less in tax in 2025/26. But the Scottish budget would be worse off in 2025/26 by over £700m.
Recent positive news on vaccine development raises expectations that 2021/22 will herald the beginnings of a recovery from both the health and economic shocks caused by Covid in 2020. With this backdrop, what are the implications for the Scottish Government’s budget for 2021/22 – due to be published on 28th January?