SO NOW we know: income taxes are likely to go up in the not too distant future.

Yes, that’s right, having this week unveiled her plans for the year ahead first minister Nicola Sturgeon confirmed that her government will - finally - start using its tax-raising powers to bolster the public purse.

While the detail is yet to be ironed out, it is widely expected that the Government will look to add a penny to the basic rate of tax, something that would increase the overall tax take to the tune of around £500 million.

Loading article content

The reaction, predictably, has been that we should brace ourselves for higher tax bills, but how big an impact is the measure really likely to have?

At the bottom end none at all, given that the personal allowance - the sum we are all allowed to earn without paying any tax - will continue to be set by Westminster. The limit currently sits at £11,500, and anyone earning below that level will continue to pay no tax at all.

Those whose earnings fall within the basic rate band would pay five per cent more tax, which may sound a lot but translates to a much lower fall in take-home pay.

Average earners - those who in Scotland earn £22,918 according to the Office for National Statistics - would see their tax bill increase from £2,283.60 to £2,397.78, but thanks to the personal allowance their post-tax pay would fall by just 0.6 per cent, from £1719.50 to £1710.02 a month.

Those at the £43,000 threshold, meanwhile, would pay £6,615 rather than £6,300 in tax while their post-tax pay would reduce by 0.9 per cent, from £36,700 to £36,385.

Of course, the Government could increase the tax take even further by adding to the higher tax bands and could even introduce additional bands to the mix - something RSM tax partner Stephen Hay said would bring Scotland into line with most other OECD countries.

But if - and it must - it means more money will be spent on our schools and hospitals, surely the increases would be a price worth paying.