Income tax revenue represents the biggest relative shortfall in revenue per head, despite higher income tax rates in Scotland
Income tax levels per head have consistently been lower in Scotland than the UK average, reflecting lower than average earnings.
The marked decline between 2014 and 2016 is generally accepted as being due to better data becoming available, rather than any behavioural shift. HMRC only started explicitly identifying Scottish tax payers (via tax codes with the S prefix) in April 2016, income tax apportionment in GERS prior to that was a survey based estimate.
The Scottish Rate of Income Tax (SRIT) came into force in 2016-17, although it was initially held at the same rate as the rest of the UK. Actual income tax policy started to diverge in 2017-18 (when the higher rate threshold was frozen in Scotland), with slight (1%) rate increases in 2018-19 and further increases thereafter (e.g. lowering the higher rate threshold, introducing the advanced rate band) .
To quote directly from the 2026-27 Scottish Budget:
"Since income tax was first partially devolved, the Scottish Government has adopted a different income tax policy to the UK Government. This has primarily had the effect of increasing tax rates on earnings above £43,663 relative to rUK. However, over the same time period, earnings have grown more slowly in Scotland than in rUK (although the SFC project that there has been some catchup more recently). The net result is that, in 2026-27, the SFC estimate that Scottish income taxpayers will pay £1,754 million more in income tax than in rUK due to policy differences..."
The net effect of the SRIT is that weighted average income tax rates are higher in Scotland than the rest of the UK; the continuing shortfall in employment taxes raised per head must therefore be explained by some combination of lower earnings and/or fewer tax payers per head in Scotland. £1,754 million spread across a tax base of 3.1 million Scottish tax payers means that on average Scottish tax payers pay ~£565 a year more as a result of the Scottish Rate of Income Tax.