Income tax is the biggest devolved tax revenue raiser for Scotland, accounting for 73 percent (c£21 billion) of all devolved tax revenues in 2025/26. The Scottish Parliament has power to set rates and thresholds for non-savings and non-dividend income of Scottish taxpayers, but the level of tax-free personal allowance and rates for savings and dividend income are reserved to the UK Parliament. Scotland currently has six income tax bands, versus three in the rest of the UK (rUK).
SNP: continuity but with caveats
The SNP manifesto promises not to increase the number of income tax bands or their rates over the lifetime of the next Parliament. However, the manifesto states all governments require flexibility to respond to material changes in circumstances in public finances or the global economy, suggesting the SNP reserves the right to increase rates or bands if it considers it to be necessary.
The manifesto also says the SNP’s aim is to make the tax system simpler by the end of the Parliament. No further details are given, but the independent economic think tank, the Institute for Fiscal Studies (IFS), suggests this could mean reducing the number of tax bands in Scotland. The IFS also points out that, unless the SNP is willing to forgo tax revenue, such simplification would require people in some bands to pay more tax. The manifesto wording implies low and middle income earners would be protected from any such tax rises.
Scottish Labour: ambition to cut taxes likely to remain just that?
Like the SNP, Labour promises not to increase income tax rates for the duration of the next Parliament, although it does not specifically mention income tax bands. Labour goes on to say its ambition is to reduce tax rates over the course of the Parliament, but caveats that this will be contingent on delivering growth and closing the economic performance gap (presumably in line with plans set out elsewhere in the manifesto).
One of Scotland’s leading independent economic think tanks, the Fraser of Allander Institute (FAI), considers the growth and economic performance gap targets set out in the Labour manifesto to be hugely ambitious, making the prospect of future tax cuts seem highly unlikely.
Reform UK: significant tax cuts but warnings over how these would be funded
Significant income tax cuts are the flagship measure in the Reform UK tax manifesto. The party pledges to immediately scrap Scotland’s six income tax bands and mirror rUK’s three bands but setting the Scottish rate at 1p below each rUK band, with a medium-term objective of being 3p below each band in the first five years of a Reform Government in Scotland. The manifesto estimates that mirroring the rUK system and the first 1p cut would cost £2 billion, with every 1p cut thereafter costing £850 million each. These are significant tax cuts equivalent to 1.5 percent of Scottish Gross Domestic Product (GDP).
Reform UK says this would be funded by the re-allocation of £1 billion currently being spent on Net Zero projects and by (presumably reducing) 132 quangos costing £6.5 billion. The manifesto also claims the economic growth generated from this tax cut will easily fund its cost.
Although neither the IFS nor the FAI dispute the quantum of these costings (albeit both point out that these costs are ongoing per annum, something that is not necessarily clear from the manifesto), each institute is critical of how Reform UK proposes to fund these tax cuts. The Scottish fiscal framework means that cuts to capital investment (which includes much of the spending on Net Zero initiatives) cannot be used to pay for tax cuts. Perhaps more importantly, there is no evidence to support the claim that the tax cuts would lead to economic growth that would make them self-funding, leading the IFS to describe this plan as “not fiscally credible”.
Scottish Conservatives: again, significant tax cuts but again warnings over how these would be funded
Like Reform UK, significant income tax cuts are one of the Conservatives’ flagship tax manifesto pledges. The party would raise the point at which all taxpayers start paying income tax in Scotland in line with inflation for every year of the next Scottish Parliament. It would also uprate the 42p Higher Rate threshold throughout the next session of Parliament until it matches the £50,270 threshold in rUK. Perhaps most significantly, the manifesto promises that by the end of the next Scottish Parliament, earnings up to the Higher Rate thresholds would only be taxed at 19p in the £1, lower than rUK (i.e. effectively reducing the current Basic and Intermediate Rates from 20 percent and 21 percent respectively to 19 percent). The FAI and IFS point out these tax cuts would cost around £3 billion per annum.
Again, both the IFS and FAI question the credibility of funding such giveaways largely through back-office and administrative savings, as has been proposed by the Conservatives.
Scottish Greens: shifting focus to tax wealth rather than work
Despite having the most wide-ranging tax manifesto of all the parties, centred around taxing the wealthy and companies that pollute the environment (either through using existing tax powers, or pushing for more devolved tax powers) the Green manifesto is relatively quiet on Scottish income tax.
The party says it will retain a progressive and redistributive income tax system; set higher rates for landlord’s income from rental properties (to be introduced following the rollout of rent controls to avoid the cost being passed onto tenants); and challenge the UK Government to accept that the power to tax income from shares and dividends is devolved (then set suitably high rates for this unearned income). The party also says it would develop proposals for a Scottish wealth tax, although no further details are given.
The Scottish Government currently does not have the power to create a bespoke new wealth tax (i.e. an annual tax on individual’s net assets). The Greens plan may be to seek these powers from the UK Government, as proposed in other areas of the manifesto. Absent that power, the Greens may look to existing devolved tax powers to tax a proxy for wealth such as property (e.g. through the Council tax system or Land and Buildings Transaction Tax) or income (e.g. through higher rates of income tax for certain levels or types of income).
The main comments from the IFS and FAI on this manifesto are the lack of policy detail, in particular policy costings, making it difficult to meaningfully assess the proposals.
Scottish Liberal Democrats: continuity but with an eye on reform
The Liberal Democrats have said they will not make “reckless unaffordable promises” but that they don’t think people can pay more tax amidst the current cost of living crisis; the inference here is no tax cuts in the short term, but no tax rises either. The party has said it will prioritise getting Scotland’s finances in shape in order to cut taxes in the future.
The Liberal Democrats are the only party who have said they will take up the Hunter Foundation on the offer in its Entrepreneurs Manifesto for Scotland (published earlier this year) to fund a specialist team to investigate both the impacts of the current income tax system and to develop a new system that will increase the tax take.
