A TAX HIKE BY THE BACK DOOR

Fresh blow to hard-working Scots as SNP refuses to ease squeeze on middle earners

MIDDLE class Scots have suffered another cash blow as the SNP refused to close the tax gap with the rest of the UK.

In a Budget overshadowed by the scandal surrounding former finance secretary Derek Mackay, ministers refused to cut the levy on Scotland’s middle earners.

From April, the threshold at which workers start paying the 41p in the pound higher rate of income tax will be frozen at £43,430. The top 46p rate will be pegged at £150,000.

With consumer price inflation currently running at 1.4 per cent, it means workers will end up with less money in their pockets.

Government forecasters say this means that 370,000 people will be worse off by £149 a year.

In addition, it is estimated that 19,000 more people will be dragged into paying the higher rate as a result of the decision to freeze the threshold. The decisions were announced by

Finance Minister Kate Forbes yesterday after she was drafted in to deliver the Budget following the shock departure of Mr Mackay hours earlier.

It means someone earning £50,000 a year will pay £1,542 more in Scotland than if they lived in England. This rises to £2,042 for those on £100,000 and £2,667 for a salary of £150,000.

The tax gap could grow further if Chancellor Sajid Javid decides to increase thresholds south of the Border when he delivers his Budget next month.

CBI Scotland’s director Tracy Black said: ‘Further divergence with the rest of the UK on income tax risks making it more difficult for businesses to attract the people and skills we need to grow the economy.’

In her address to MSPs, Miss Forbes said the rate at which Scots start paying the basic 20 per cent rate of tax will rise from £14,549 now to £14,585, while the threshold for the 21 per cent intermediate rate will rise from £24,944 to £25,158.

The Scottish Government said that everyone earning less than £27,243 will pay slightly less income tax in 2020/21 than they would have if they had been based in other parts of the UK.

Tory finance spokesman Murdo Fraser said with a ‘substantial increase in the funding block grant’ worth at least £1.1billion in real terms ‘there can be no case for additional tax rises or for any further cuts in our vital frontline services’.

The Scottish Fiscal Commission, which is responsible for providing the Scottish Government’s economic forecasts, estimates 19,000 people who were previously intermediate rate taxpayers will be dragged into the higher rate band as a result of the Budget proposals.

It said: ‘These taxpayers will pay an extra 20 per cent on each pound earned, up to a maximum increase of £149 in their income tax liabilities.’ It also said 370,000 more higher and top rate taxpayers will be hit by the threshold freeze.

The SNP Government also failed to deliver in full on its pledge to bring taxes for larger firms into line with the rest of the UK. In Scotland, large firms pay an extra 2.6p in the pound through the ‘large business supplement’, compared to 1.3p in the rest of the UK.

Miss Forbes said only those firms in premises with a rateable value of between £51,000 and £95,000 will now face a 1.3p in the pound supplement, but the full 2.6p which will still be paid by those with a rateable value above £95,000.

On the tax plans, Alexander Garden, chairman of the Chartered Institute of Taxation’s Scottish Technical Committee, said: ‘We need to wait until the UK Budget on March 11 for confirmation of the impact of UK changes on Scottish taxpayers and the potential for further divergence.’

‘Divergence with the rest of the UK’