Scots to pay £108m more in taxes than rest of UK

Figures are for first year of devolved income tax

More than half a million Scots will pay more in tax this year as a result of changes brought in at Holyrood, a new report has estimated.

For 2017-18, the first year ministers at Holyrood had power over income tax rates and bands, they only made minor changes.

Rather than follow Westminster’s example and increase the threshold at which people start paying the 40p rate of income tax, the Scottish Government opted to keep this at £43,000.

An estimated 507,000 Scottish taxpayers were affected by this, according to the National Audit Office, with the change resulting in them paying an estimated £108 million more in tax.

The report said: “The extra tax liabilities are an average of £213 compared to other UK taxpayers.

“This is because taxpayers in Scotland start paying the higher rate of tax (40%) when they earn £43,000, as opposed to £45,000 in the rest of the UK.”

It added that HM Revenue and Customs (HMRC) “does not expect that the difference between Scotland and the rest of the UK will lead to avoidance or evasion in 2017-18”.

However, if the tax rates between Scotland and the rest of the UK “diverge more substantially” in the future, HMRC said it would increase its compliance work north of the border.

The report was published ahead of next month’s Scottish budget, in which it is expected SNP ministers could make more changes to the income tax regime after First Minister Nicola Sturgeon called for a debate on more “progressive” use of the legislation.

Scotland has an estimated 2.6 million taxpayers, with HMRC stating it has now rectified issues that led to it not identifying 420,000 people as potential Scottish taxpayers in 2015.

Amyas Morse, head of the National Audit Office, said: “HMRC has made good progress in assuring itself of the accuracy of the Scottish taxpayer population, but could do more with its own data to improve the accuracy of income-tax receipt estimates.

“People are at risk of paying the incorrect amount of tax if they do not provide HMRC with accurate address data and HMRC does not know whether its interventions to raise awareness of this has been successful.”

The extra tax liabilities are an average of £213 compared to other UK taxpayers