Ahsan Mustafa on new rules around debt recovery
Charities as employers sometimes have the unenviable task of imposing earnings arrestment on staff and new laws have changed the amount of statutory deductions employers can deduct.
Six months have now passed since the Diligence against Earnings (Variation) (Scotland) Regulations 2024 came into effect.
The changes, which amended parts of the Debtors (Scotland) Act 1987, updated how much of a person’s income must be protected before deductions for debt recovery can take place.
The purpose of the reform was relatively simple: to ensure that earnings arrestments, one of the main tools for debt enforcement in Scotland, remain proportionate in light of changing economic conditions.
The new figures were intended to strike a fairer balance between creditors’ rights and the need for individuals to retain enough income for essential living costs.
Legal background
In Scots law, 'diligence' refers to the suite of legal procedures available to creditors to recover unpaid debts. Among these, the earnings arrestment is one of the most widely used.
Once a charge for payment has been served and the statutory waiting period has expired, a creditor can instruct the debtor’s employer to deduct part of their wages and send it directly to the creditor. The process is regulated primarily under Part 3 of the Debtors (Scotland) Act 1987.
Employers who receive an earnings arrestment schedule must comply with the statutory schedule of deductions. Failure to do so may expose them to liability for the sums that should have been transferred. The system is designed to provide a clear, enforceable framework that limits the discretion of both creditors and employers.
The 2024 regulations: main changes
The Diligence against Earnings (Variation) (Scotland) Regulations 2024 came into force on 6 April 2025, replacing the previous year’s figures. They amended section 53(2)(b), section 63(4)(b), and Schedule 2 of the 1987 Act, increasing the “protected earnings level”, the amount a worker must be allowed to keep before deductions begin.
New protected amounts:
- Monthly: £750 (up from £655.83).
- Weekly: £172.61 (up from £150.94).
- Daily: £24.66 (up from £21.56).
The changes apply automatically to all existing arrestments. Debtors do not need to make a separate application, but employers must ensure that payroll systems or deduction tables reflect the new rates.
In practical terms, the adjustment means that employees on lower incomes retain a slightly larger portion of their earnings, while deductions for those on higher incomes are adjusted proportionally.
Rationale and context
Under section 63(5) of the 1987 Act, the Scottish ministers are required to review the prescribed figures periodically to keep them aligned with current economic conditions. Ordinarily this review occurs every three years, but recent inflationary pressures prompted consecutive updates in 2023 and 2024.
The 2024 revision was introduced as an interim measure ahead of broader changes contained in the Bankruptcy and Diligence (Scotland) Act 2024. During consultation and parliamentary debate, a range of stakeholders, including debt-advice bodies, employers, and enforcement officers, agreed that the protected amounts should be updated more frequently to avoid arrears being pursued on the basis of outdated figures.
The chosen rates were intended to maintain a proportionate balance rather than to introduce a new policy direction.
Economic environment
Although headline inflation began to stabilise in late 2024, core living costs, particularly housing, energy, and food, remain significantly higher than in previous years. Average wage growth has not fully matched these increases, placing pressure on household budgets.
In this context, earnings arrestments can have material effects on financial stability. The statutory protected amount functions as a safeguard to ensure that enforcement action does not remove income required for basic expenditure. The 2024 figures therefore aim to preserve the same real-terms level of protection that existed before the recent inflationary period.
Compliance and awareness
The Diligence against Earnings (Variation) (Scotland) Regulations 2024 introduced new deduction tables and protected earnings levels that came into effect on 6 April 2025.
The Scottish Government issued a Business and Regulatory Impact Assessment noting that employers and payroll providers would need to update systems to reflect these revised figures. Professional bodies such as the Chartered Institute of Payroll Professionals (CIPP) and payroll software vendors have published guidance to support compliance.
At the time of writing, there is no published data assessing employer awareness or implementation rates. However, the statutory obligation remains: employers must ensure that deductions applied under an earnings arrestment comply with the figures currently in force.
Interaction with the 2024 act
The Bankruptcy and Diligence (Scotland) Act 2024 introduces a broader modernisation of Scotland’s debt recovery framework. Among its provisions are:
- Enabling digital communication between creditors, employers, and the Accountant in Bankruptcy;
- Consolidating procedural rules across different forms of diligence; and
- introducing clearer guidance on debtor notifications and appeals.
The 2024 Variation Regulations should be seen as part of this wider process, an early adjustment to ensure the existing earnings arrestment system remains fit for purpose while more comprehensive reforms are implemented.
Implications for stakeholders
For employers, the main implications are operational: ensuring that payroll systems and HR teams are aware of the updated rates, that deductions are calculated correctly, and that communication with employees remains transparent.
For creditors and enforcement officers, the changes may slightly extend repayment periods for smaller debts but do not alter the fundamental legal rights to recover sums owed.
For advisers and the voluntary sector, there remains a continuing role in raising awareness of statutory protections and helping clients confirm whether deductions are being made lawfully.
Looking ahead
The Scottish Government has indicated that it intends to review the figures for protected earnings more regularly in future, potentially on an annual basis, to prevent them becoming misaligned with economic reality. Further guidance for employers and payroll providers may also follow, particularly once the new bankruptcy and diligence framework is fully operational.
In the meantime, the 2024 Regulations mark a modest but technically important adjustment to Scotland’s debt enforcement landscape. Their effectiveness will depend less on the legislative text itself than on consistent implementation across the public and private sectors.
Six months on, it appears that the framework for fairer wage deductions is in place. The next test is ensuring that it operates in practice as the law intends, accurately, proportionately, and with due regard to both creditor entitlement and debtor protection.
Ahsan Mustafa is a senior associate in the Banking Litigation Team at Aberdein Considine LLP and also sits on the Law Society of Scotland’s Consumer Law Subcommittee.
