SNP’s hidden tax whammy
Middle-income Scots will lose extra money in National Insurance payments after the Nats freeze tax threshold to secure a Green deal
MIDDLE-CLASS Scots will see their pay packets shrink next year following the SNP’s backroom Budget deal with the Greens, thanks to a double tax whammy.
Those earning more than £43,000 will be £200 worse off and those in the rest of the UK £200 better off.
This is because middle-earners north of the Border will be hit first by the SNP Government’s decision to freeze the threshold for paying the higher 40p rate of income tax – followed by a UK-wide increase in National Insurance thresholds.
The impact of the combined changes will see Scots earning more than £43,000 paying £200 more than this year.
Middle-earners in the rest of the UK will end up saving £200 as, unlike in Scotland, the threshold for the higher rate of income tax is set to be raised from £43,000 to £45,000.
At the same time as changes to income tax, the rate at which taxpayers start paying a lower 2 per cent rate of National Insurance, rather than the 12 per cent basic rate, will also rise to £45,000.
Last night, Scottish Tory finance spokesman Murdo Fraser criticised the Nationalists for ‘punishing’ hardworking and successful Scots.
He said: ‘This is further evidence of how damaging and unfair Derek Mackay’s Budget is. The SNP has made it clear it is willing to make thousands of families across Scotland significantly worse off.
‘The Nats have repeatedly asked what type of country we want Scotland to be. Based on the evidence, the SNP sees us as a country that punishes both hard work and success.’
The SNP’s original plans to raise the higher income tax threshold by inflation to £43,430 would have seen Scots £114 worse off next year.
But Finance Secretary Mr Mackay decided to freeze the threshold at £43,000 in a backroom deal with the Green party to avoid the humiliation of his Budget being voted down.
His pact with Green party coconvener Patrick Harvie will see Scotland become the highest-taxed part of the UK.
The Nationalist tax grab will mean 368,000 Scots pay £400 more income tax than people in England.
This will be the first time those living in Scotland will be forced to pay more than people earning the same in other parts of Britain – in the first year that Holyrood has had full control over income tax.
If Mr Mackay’s freeze continues in the coming years, higher rate taxpayers could be forced to pay £3,600 more in tax than those living in the rest of the UK between now and 2020.
This follows Chancellor Philip Hammond’s decision to increase the threshold to £50,000 in this time frame.
The Scottish Government was criticised by campaigners who said deciding to have a different threshold was ‘unnecessarily complicated’.
John O’Connell, chief executive of the TaxPayers’ Alliance, said: ‘This is yet another example of how unnecessarily complicated and complex our tax has become.
‘Without radical reform and simplifications it becomes increasingly difficult for the public to get to grips and scrutinise the policies which directly affect them.
‘Politicians need to act to make the system simpler and fairer.’
Fears have been raised that the SNP’s decision to have a ‘higher burden of taxation’ than elsewhere in the UK will ‘ultimately drive away investment and cost jobs’.
In trying to defend his Budget, Mr Mackay has claimed 99 per cent of Scots will be no worse off. But many more would be had Mr Hammond not increased the tax-free allowance from £11,000 to £11,500.
A Scottish Government spokesman said: ‘The higher rate threshold will remain unchanged at £43,000. This threshold for paying higher rate income tax, which affects the top 10 per cent of adults in Scotland, will generate an extra £29million tax revenue.
‘The revised higher rate threshold forms part of an agreement with the Scottish Green Party that secures the passage of the Scottish Budget and Local Government Settlement. It protects 99 per cent of Scottish adults who will pay no more tax than they do in the current year.’
In relation to the National Insurance changes, a Treasury spokesman said: ‘The higher rate threshold and national insurance contribution upper earnings limit have been aligned since 2009 – this keeps the tax system simpler.’
Comment – Page 16
‘Unnecessarily complicated’