Scottish Budget 2024 to 2025: distributional analysis

Analysis of the impact on household incomes of tax and social security decisions taken in the 2024-25 Scottish Budget.

Annex: Methodology

Modelling Approach

This analysis uses UKMOD, an open-access microsimulation model developed by the Institute for Social and Economic Research (ISER) at the University of Essex. The model applies tax and benefit rules to a set of individual and household-level data, allowing the user to simulate and compare alternative scenarios.

The input data in UKMOD is derived from DWP's Family Resources Survey (FRS). The analysis in this paper uses two years of FRS data, namely 2019-20 and 2021-22. Data from 2020-21 is excluded due to the impacts of the pandemic on survey collection. To pool the data, the grossing weights used to scale the FRS sample to the whole population are divided by the number of data years, in this case two.

The income components and other monetary variables are then scaled to the year being analysed (2024-25) based on the Office for Budget Responsibility (OBR) latest forecasts. No adjustments are made for demographic change.

All modelling includes adjustments to take-up rates of social security payments to reflect take-up as observed in the outturn data.

Analysing the distribution of income

All analysis in this paper shows the impact of policies on net equivalised household income, before housing costs.

In this context, net means after the impact of taxes and social security payments.

Equivalised means income is adjusted based on household size and composition, to allow for the fact that larger households will require a higher income to maintain a similar standard of living as a smaller household. This analysis uses the modified OECD equivalence scale, following the same approach as used in UK and Scottish Government poverty analysis. Further detail on the equivalisation calculation is available here.

Household income means that all income is assumed to be shared across all members of the household. This analysis uses the Family Resources Survey definition of a household (i.e. one person living alone or a group of people (not necessarily related) living at the same address, who share cooking facilities and share a living room or sitting room or dining area.)

Before housing costs means that no deductions are made for rent or mortgage payments from household incomes.

To summarise impacts across the income distribution, households are ranked from the lowest net equivalised household income to the highest, then divided into ten equal groups called deciles.

Results are reported based on the average gain or loss of income within these household income deciles. There may still be wide variation around this average within a decile.

As an indication of the income levels in each decile, table A1 below shows the median gross (i.e. pre-tax and pre-social security) unequivalised household income in each decile.

Table A1: median unequivalised gross annual household income, by equivalised net income decile

Equivalised net household income decile, before housing costs

Median unequivalised gross annual household income (£)






















The following policies are devolved taxes or social security payments which are explicitly modelled in this analysis:

  • Scottish Income Tax
  • Council Tax, excluding water and sewerage charges
  • Council Tax Reduction[9]
  • Scottish Child Payment
  • Discretionary Housing Payments (DHPs) used to mitigate the bedroom tax and benefit cap.[10]
  • Carers Allowance Supplement
  • Best Start Grant and Best Start Foods
  • Child Winter Heating Payment

In addition to the payments listed above, the Scottish Government also has responsibility for a range of disability benefits, which have recently been replaced by the Adult Disability Payment, Child Disability Payment and Pension Age Disability Payment.

The predecessors for these payments are covered in the underlying survey data, but the impact of the changes introduced by the Scottish Government are not modelled. Consequently, differences in policy on these aspects of the social security system do not account for any of the differences shown in figures 2 or 3 above. As more data becomes available on the effect Scottish Government policy changes have on take-up, we may revisit modelling of these aspects of the social security system.

Figure 1 presents analysis of a wider segment of the tax and social security system, including several reserved policy measures, and so additionally includes:

  • National Insurance Contributions
  • Income tax on savings and dividends income
  • Universal Credit, and the legacy benefits it replaces
  • Pension Credit
  • Child Benefit
  • State Pensions
  • Statutory sick pay
  • Statutory maternity pay


Table A2 below summarises the parameters used for each of the two counterfactuals reported on in this analysis.

Table A2: counterfactual parameters


rUK policy counterfactual for 2024/25

No policy change counterfactual for 2024/25

Income Tax

Income Tax rates and bands as in place in England & Northern Ireland for 2024/25, based on Autumn Statement announcements.

Top rate threshold frozen.

Personal allowance frozen, as per UKG policy.

All other bands uprated by CPI (6.7%).

All rates unchanged.

Council Tax

Excluded from comparisons made against this counterfactual.

Average Band D Council Tax increased at the same rate as 2023/24 (5%).

Scottish Child Payment

Policy not in place.

Awards uprated with CPI.

Eligibility criteria remain unchanged.

Discretionary Housing Payments to mitigate bedroom tax benefit cap

Policy not in place.

Awards uprated with CPI.

Eligibility criteria remain unchanged.

Carers Allowance Supplement

Policy not in place.

Awards uprated with CPI.

Eligibility criteria remain unchanged.

Child Winter Heating Payment

Policy not in place.

Awards fixed in cash terms.

Eligibility criteria remain unchanged.

Best Start grant & Best Start Foods

Replaced with Sure Start and Healthy Start grants

Awards fixed in cash terms.

Eligibility criteria remain unchanged.

Council Tax Reduction

Excluded from comparisons made against this counterfactual, as grouped as part of Council Tax.

Eligibility criteria and calculation approach remain unchanged.



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