Income tax gap a ‘challenge’ to Scottish jobs

The income tax gap between Scotland and England is a source of “significant concern” in the financial sector and is potentially putting people off working north of the border, the governing body for London’s financial district has said.

Chris Hayward, policy chairman at the City of London Corporation, said it was a “risk to Scottish jobs”.

He said the issue had been raised in a meeting he held with Humza Yousaf, the First Minister,earlierthisweek,aswellasin meetingswithfinancialfigures.

Judith Cruickshank, managing director of commercial mid-market at the Royal Bank of Scotland, previously raised concerns that workers in the financial sector are choosing to live in northern English cities rather than move to Scotland where they would pay more income tax.

A new income tax band for higher earners was created as partoftherecentscottishbudget, while the top rate will rise by 1p in the pound. The threshold for paying the higher rate of tax – £43,663 – will be frozen.

Taxpayers earning more than £28,850 already pay more income tax in Scotland than in the rest of the UK. As a result of thelatestchanges,scotlandwill havesixincometaxbandswhile the rest of the UK has three. Thoseearning£150,000willpay around£6,000ayearmorethan down south.

Speakingtothescotsman,mr Hayward said: “I would share the concern. It was raised at the meetingwehadyesterday,actually, that the gap is noticeable and is significant, and is potentially a detraction from working in Scotland. From the point ofviewofscottishjobsandscottish employment, that’s a challenge.

“It’s not for me to comment on thedomesticpoliciesofthescottishgovernment,becausethat’s a decision the Scottish Government have made, they’ve set out thereasonswhythey’vemadeit.

“But I do think that there is a fear that that will not help Scottish jobs, because if you can cross the border, frankly, and pay less tax, and still commute or work remotely, and you’re going to make a significant saving on your tax bill, the chances are that will impact.”

Asked if he had heard concerns being raised in the financial sector, he said: “So there is, I think,significantconcernabout the tax gap. It’s been raised with mesincei’vebeenuphere,soit’s clearly on everybody’s minds.”

He added: “Those concerns exist,andtheyhavebeenstrongly articulated to me by the Scottish financial community while I’ve been here.”

Edinburghhasthesecondbiggest

financial services sector in the UK, while Glasgow also has a significant presence.

Elsewhere, Mr Hayward said hehadspokentothefirstminister about attracting investment into the Scottish renewables industry.

He said there are fears the commitment to net zero has “stalled”. The UK Government has moved its target dates, he said, while Labour has rowed back on its green investment pledge. Meanwhile, a recent report warned Scotland will miss its 2030 climate targets.

Mr Hayward said private finance can fund projects, but “significant investment won’t happenunlessthereisfullpolitical commitment”.

The gap is noticeable and is significant, and is potentially a detraction from working

Chris Hayward