Final Income Tax outturn data for 2024‑25 was published by HMRC today. The data released will result in a large reduction to the Scottish Government’s funding in 2027‑28. This is the largest adjustment because of Income Tax since it was devolved to the Scottish Parliament.
In this initial Insight responding to today’s publication we explain what the data shows, how the reconciliation is calculated and why it has happened. We’ll discuss the latest outturn data and what it means for Scottish Income Tax in more depth in our upcoming August 2026 Fiscal Update and Forecast Evaluation Report. We also explained the reconciliations process in a recent Insight.
What happened to Scottish Income Tax in 2024‑25?
The figures show that Income Tax in Scotland raised £18,635 million in 2024‑25, growing by 9.0 per cent since 2023‑24, which compares with 10.2 per cent growth in revenues in England and Northern Ireland.
How large is the negative reconciliation?
Funding from Income Tax when the Scottish Budget is set is initially based on SFC and OBR forecasts. Now that we have outturn data for 2024‑25, a correction can be applied for the differences between forecasts and the final data, which is called a reconciliation.
The reconciliation figure for 2024‑25 is negative £728 million, which will be applied in the 2027‑28 Scottish Budget. This is the largest reconciliation to date and exceeds the Scottish Government’s forecast borrowing limit. The figure is provisional until population data is released over the summer, but the impact of this population data will be small and the final figure should be very close to the provisional reconciliation.
Figure 1: Scottish Income Tax and BGA outturn for 2024‑25 compared to December 2023 Budget setting forecasts
What is the latest Income Tax net position?
The Income Tax net position for 2024‑25 was projected to be £1,412 million when the Budget was set. This was based on our December 2023 forecast and the OBR’s November 2023 forecast. The net position is calculated by adding the SIT figure to the BGA. Tax BGAs reduce the Scottish Budget so are presented as negative.
With the latest outturn data the net position has decreased to £684 million, mainly because the Income Tax BGA has increased. This is also lower than the outturn net position for 2023‑24, which was £730 million.
How much did SFC and OBR forecast errors contribute?
Relative to the Budget setting forecasts, SIT in 2024‑25 is £209 million lower whereas the Income Tax BGA is £519 million higher. While neither of these errors are particularly large compared to recent years, they both have a negative effect on Scottish funding and combine to make a larger negative reconciliation, as shown in Figure 1. This is a feature of the Fiscal Framework and a risk that we highlighted in our August 2025 Fiscal Update.
Why was the Income Tax reconciliation negative?
As we showed in our August 2025 Forecast Evaluation Report, the OBR’s November 2023 forecast of average earnings growth for the UK in 2024-25 has been revised up by 0.5 percentage points more than our December 2023 forecast for Scotland. This will have contributed to the negative income tax reconciliation.
How does this reconciliation compare to others?
Figure 2 shows how the negative £728 million reconciliation for 2024‑25 compares with previous years. We have seen large reconciliations in the previous three years, including the negative £390 million for 2021‑22. However, this figure was within the Scottish Government’s borrowing limit.
The borrowing limit in 2027-28 was estimated at £668 million in January 2026 and this limit is now set to be exceeded. The reconciliation will therefore reduce the funding available to the Scottish Government in 2027‑28 if the Scottish Government borrows the maximum amount allowed next year, and will reduce available funding in later years as the borrowing is repaid.
Figure 2: Outturn Income Tax reconciliations
