SNP TAX TRAP SNARES 38,000
Hard-working Scots forced to pay extra by ‘underhand’ policy
THOUSANDS of workers have been forced to pay hundreds more in tax after being dragged into the higher rate band by the SNP.
Some 375,000 Scots are in this group in the current year compared with 337,000 two years ago, figures from Her Majesty’s Revenue and Customs (HMRC) show.
This means 38,000 hard-working people earning £43,000 or above were forced to pay more income tax than counterparts south of the Border last year – in some cases as much as £400 extra.
The SNP froze the point at which taxpayers start to pay the 40p rate at £43,000, despite it rising to £46,350 elsewhere in the UK.
Thousands of workers have since become victims of so-called ‘fiscal drag’ – when tax thresholds do not rise in line with wages, forcing people into higher bands.
Economists generally agree that fiscal drag is underhand because no rises need be announced yet it increases the tax take by snaring people with relatively modest salaries – such as senior teachers, nurses and police officers – into tax brackets originally intended for the better off.
Scottish Conservative finance spokesman Murdo Fraser said: ‘Once again, these figures make clear the damaging impact of the SNP’s high tax agenda on hard-working Scots.
‘Tens of thousands of taxpayers have been dragged into paying the higher rate. However,
according to last week’s projections, [Finance Secretary] Derek Mackay will still face a shortfall in revenue.
‘People across Scotland will be hoping that doesn’t mean the SNP will be coming to raid their pay packets with more tax increases next year.’
Mr Mackay decided to freeze the threshold for the higher rate at £43,000 in 2016.
UK Chancellor Philip Hammond raised the threshold to £45,000 and then again to £46,351. It is expected to rise to £50,000 by 2021. Mr Hammond was widely praised for addressing the unfairness of fiscal drag.
So while the number of people paying the higher rate rose by 38,000 in Scotland, it has fallen from 4.42million to 4.28million over the same two-year period in the rest of the UK.
The SNP also introduced a new income tax system in April of this year with a number of revised rates – including pushing up the higher rate of tax from 40p to 41p.
For the 2018/19 tax year, Scots earning more than £43,430 pay the higher rate – up only marginally on the original £43,000 and still behind the rest of the UK.
Anyone earning more than £26,000 in Scotland now pays more tax than their counterparts elsewhere in the UK, while those on £33,000 take home less.
The SNP introduced a new starter rate at 19p, kept the 20p basic rate and brought in a new intermediate rate of 21p for those earning between £24,000 and £43,430, with the 41p rate kicking in for those earning up to £150,000. The top rate of tax was raised to 46p.
Last month, Mr Mackay signalled further ‘divergence’ on income tax rates were ‘inevitable’ as the SNP plans to build a more ‘progressive’ system.
He failed to outline how far the Government would go.
A Scottish Government spokesman said: ‘The new income tax rates and bands will make the system more progressive and deliver additional revenue to invest in Scotland’s public services and economy.
‘This progressive approach to reforming income tax will not only protect the lowest earning taxpayers, but also ensure 70 per cent of Scottish taxpayers pay less tax this year than last year for a given income.’
As well as income tax rises, local authorities have increased council tax by up to 3 per cent to fund vital services.
Fiscal drag was previously used by former chancellor George Osborne. Between 2010 and 2016, more than 1.6million middle-class workers were caught in the 40p higher income tax net when the threshold failed to increase in line with rising wages.
At its peak the number of people paying the higher rate hit 4.6million – including 372,000 in Scotland.
But the UK Government remedied the situation, when the threshold for the higher 40p rate went up to £45,000 from 2017.
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