One million Scots to pay more income tax than rest of UK
●New tax bands mean those earning over £33k will pay more income tax ●Draft budget predicts the lowest economic growth in almost 60 years ●Private schools no longer eligible for charitable relief from business rates
Finance Minister Derek Mackay announced a radical reform of the Scottish tax system in yesterday’s Budget.
From next year Scottish taxpayers earning more than £26,000 will be forced to pay more than they would be charged south of the Border.
The first Holyrood budget to include substantial changes to the income tax system saw the Finance Secretary promise to raise an extra £164 million through the levy.
More than one million Scots will pay more income tax than their counterparts elsewhere in the UK.
The reforms included a one pence tax cut for lower pay levels, which enabled Mr Mackay to say that the majority of Scotland’s 2.5 million workers would be charged less than in the rest of the UK.
But they also included an income tax hike that would see the more than one million taxpayers paid over £26,000 charged more than they would be south of the Border.
The increase in the levy was condemned by the Scottish Conservatives as a “Nat tax” which broke the SNP’S manifesto promise not to
increase the basic rate. The Finance Secretary countered saying Scotland had become the “fairest taxed part of the UK”.
Mr Mackay announced the creation of two new tax bands, which will split the current basic rate band into three, and increase the overall number of bands from three to five.
It will see an end to the established arrangement whereby taxpayers have been charged at 20 per cent on income between £11,500 and £43,000.
A new “starter” band will be introduced that will see income between 11,850 and £13,850 charged at 19 per cent rather than 20 per cent – a move which enabled Mr Mackay to announce a tax cut for the lower paid.
A new “intermediate” band is to be introduced to allow Mr Mackay to put a penny on tax on all those earning more than £24,000.
Income within the intermediate band of between £24,000 and £44,273 will be taxed at 21 per cent rather than the current basic rate of 20 per cent.
The creation of the two new bands had the effect of narrowing the band at which the basic rate of 20 per cent is charged from around £11,500£43,000 to £13,850- £24,000.
An extra penny will also be imposed on those higher rate taxpapers (those earning between £44,273 and £150,000) with the rate increasing from 40 per cent to 41 per cent.
Mr Mackay restricted tax rises on the additional rate payers (those earning more than £150,000) to an increase from 45 per cent to 46 per cent.
Whenthecutforthelowpaid combined with increases in the tax free personal allowance announced by Chancellor Philip Hammond in the UK budget are taken into account, Scots earning £33,000 or more will pay more income tax next year than they did this year.
The diverging tax systems north and south of the Border mean those Scots earning £26,000 or more will next year pay more income tax than someone on the same salary south of the Border.
Fifty-five per cent of Scottish taxpayers earn less than £26,000 leading to Mr Mackay claiming the majority of Scottish workers would be paying less than those elsewhere in the UK.
The remaining 45 per cent, who are paid over £26,000, amount to more than one million Scottish workers and they now face a tax rise. Someone earning £35,000 will end up paying £90 more than an individual on the same money south of the Border.
Those on a £40,000 salary will end up paying £140 more their equivalents elsewhere in the UK. Those Scots earning £50,000 will pay £655 more than those on the same salary south of the Border.
Those on £75,000 would end up paying £905 more than someone on the same salary elsewhere in the UK. And someone on £100,000 would pay £1,155 more in Scotland.
Workers on £15,000 would only be £20 better off next year compared with those south of the border as a result of the one penny cut in the starter band.
Shadow Finance Secretary Murdo Fraser said: “This Nat Tax will hit nearly half of Scottish workers in the pocket.
“That is a tax on aspiration, a punishment for daring to work hard, and a direct breach of the promise made by the SNP in its election manifesto.”
Mr Mackay also announced that first time house buyers would be excused Land and Buildings Transaction Tax on properties up the the value of £175,000.
He also said private schools would have to pay millions of pounds more in business rates after axing the relief they currently enjoy as a result of their charitable status.
The one per cent public sector pay cap will be lifted with a guaranteed minimum pay increase of 3 per cent for all public sector workers earning £30,000 or less, 2 per cent for those earning above £30,000 and a cap of £1,600 for those earning £80,000 or more.
Mr Mackay said: “These decisions have enabled me to reverse the real terms cut that the UK government has imposed on our resource budget next year, whilst ensuring that Scotland is not just the fairest taxed part of the UK but, for the majority of taxpayers, the lowest taxed part of the UK.”