Finance Secretary Kate Forbes delivered her Scottish Budget on 28 January 2021 but no changes were made to the Scottish income tax rates or bands for 2021/22, which gets under way on 6 April 2021.

It’s only part of the picture for taxpayers in Scotland, however, because Forbes’ speech came ahead of UK Chancellor Rishi Sunak’s Spring Budget, which takes place on 3 March 2021.

You have to feel for Forbes. It’s the second consecutive year she’s set out her tax plans for the year ahead not knowing the full picture down south.

What we do know is that the 2021/22 personal allowance will increase in line with the September 2020 Consumer Prices Index (CPI) figure of 0.5%.

Westminster still determines the UK personal allowance and it should rise from £12,500 to around £12,570 when Sunak delivers his speech next week.

If Westminster were to make any significant changes to income tax for the rest of the UK, Forbes might need to revisit her figures.

But for now, with Holyrood setting the rates and bands of income tax in Scotland, let’s have a look at what income tax might look like in 2021/22.

Higher & top earners

Assuming the 2021/22 personal allowance does rise 0.5%, the starter, basic and intermediate bands of income tax in Scotland will follow suit.

That means the higher rate in Scotland will rise from £43,430 in 2020/21 to £43,662 in 2021/22, although the top-rate threshold stays at £150,000.

If you reside in Scotland, earn a salary of £175,000 in 2021/22 and you have no other forms of income, all of that will be liable for income tax.

That’s because you are not entitled to the personal allowance as your income is more than £125,140.

Due to the starter, basic and intermediate bands of income tax increasing in line with inflation, you should pay slightly less income tax in 2021/22.

Lower, intermediate & higher earners

The small inflationary increase to the UK personal allowance will nudge up the starter, basic, and intermediate tax rates in Scotland by 0.5%.

Starter-rate tax of 19% will be due on income between £12,570 and £14,667 in 2021/22, while the 20% basic rate will kick in above £14,667 up to £25,296.

The intermediate rate of 21% will apply on any slice of income in excess of £25,296 up to the higher-rate threshold of £43,662.

That means taxpayers in these brackets will see their 2021/22 income tax bills decrease modestly in comparison to 2020/21.

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