SNP urged to act as Scots face prospect of tax misery
NEARLY 100,000 Scots will be dragged into paying punishing higher rates of income tax unless SNP ministers make changes to account for soaring inflation.
The Scottish Government has been urged to increase the threshold for paying the 41p higher rate of tax – or families will face another savage financial blow.
Figures from its own financial forecaster show just over 87,000 more people will be paying the higher rate over this year and next year if the threshold is frozen.
It may also further widen the tax gap between Scotland and the rest of the UK, as Tory leadership frontrunner Liz Truss is considering increases to the threshold south of the Border.
Everyone earning more than £27,850 already pays more tax in Scotland than they would elsewhere in the UK – and the SNP/Green Government is considering further rises for higher earners in its Budget later this year.
Scottish Conservative public finance spokesman Douglas Lumsden said: ‘Under the SNP, working Scots are getting a worse deal than anywhere else in the UK.
‘If they freeze the threshold while it increases south of the Border, then even more Scottish workers on middle incomes are dragged into the higher band and clobbered by the tax man. The SNP Government should not be pocketing extra tax cash as a result of record inflation, while families are struggling with a cost of living crisis.’
In England, the 20p basic rate of income tax applies to all taxable income up to £50,270, with a 40p higher rate then charged on income from £50,271 to £150,000, then a 45p rate above that.
But after SNP reforms in Scotland, workers currently pay a 19p starter rate on income between £12,571 and £14,732, then a 20 per cent basic rate up to £25,688 and a 21 per cent intermediate rate up to £43,662. Earnings above £43,663 attract a 41 per cent higher rate, rising to 46 per cent on income above £150,000.
When thresholds are frozen rather than rising with inflation, more people are dragged into higher tax bands.
The Scottish Fiscal Commission estimated that the decision to freeze the higher rate threshold at £43,663 this year will result in the number of people paying it rising by 53,274, to 477,530.
It also estimated that, if the threshold is frozen again in the upcoming Budget for 2023-24, then a further 33,839 people will be dragged in.
At present, someone on a £45,000 salary pays £439 more in Scotland, rising to £1,489 for people on £50,000, £2,043 at £100,000 and £3,169 at £200,000. Research by the Fraser of Allander Institute earlier this month showed a 1p cut to the basic rate of income tax, which is planned for 2024 by the UK Government but may be brought forward, would hand a £420million funding boost to the SNP.
Charandeep Singh, deputy chief executive of the Scottish Chambers of Commerce, said: ‘We need as much parity between Scotland and the rest of the UK as possible to avoid competitive disadvantage. A level tax playing field is essential for the economy, supports businesses, their employees and improves Scotland’s competitiveness.’
A Scottish Government spokesman said: ‘Most taxpayers in Scotland pay less income tax than they would if they lived elsewhere in the UK, protecting lower and middle income earners while raising additional revenue to help deliver the widest range of public services available anywhere in the UK.’
‘Level playing field is essential’
MILLIONS of Scots face soaring energy bills and mortgage repayments – and now nearly 100,000 could be hit with yet another SNP tax raid.
Figures from the SNP Government’s own experts show at least 87,000 people risk being dragged into the higher rate of tax.
Without urgent intervention to account for rocketing inflation, large swathes of the population will lose a larger chunk of their incomes – a damaging blow for hardworking families in the midst of the worst cost-of-living crisis for 45 years.
And it could lead to a widening of the cross-Border tax gap, just as Tory leadership frontrunner Liz Truss considers increasing the tax threshold.
Under the existing regime, everyone earning more than £27,850 already pays more tax in Scotland than the rest of the UK. Astonishingly, the SNP and its Marxist partners the Greens are planning further tax rises for higher earners in their Budget later this year.
A failure to prevent ‘fiscal drag’ would be a huge setback for any attempt at revitalising our beleaguered economy after the ravages of the pandemic. It could also lead to a brain drain, with the brightest and best leaving to earn a living south of the Border where they will get to keep more of their hard-earned salary.
Nicola Sturgeon relentlessly asserts that her government lacks the powers it needs – but it has the ability to set tax brackets.
Rather than complaining from the sidelines about her administration’s supposed impotence, she should act now to prevent this injustice.