Top-rate Scots taxpayers forecast to increase by almost 50% in five years
The number of Scots paying the top rate of income tax is forecast to rise by almost 50 per cent in the next five years.
Experts from the Scottish Fiscal Commission (SFC) explained rising earnings are “sucking” more people into the additional rate band – which sees those north of the Border earning £150,000 a year or more paying income tax at 46p. The SFC has forecast the number of Scots in this category is to increase from 14,900 in 2018-19 to 22,000 in 2023-24, a rise of more than 47 per cent.
That increase is based on the threshold for the additional rate remaining frozen at £150,000 over the five years, Professor David Ulph from the SFC said.
He told MSPS on Holyrood’s finance committee: “Because we’ve assumed the top rate of tax threshold will be frozen at £150,000 throughout the five years of the forecast, if you are sitting just below £150,000 and you have say 2 per cent or 3 per cent growth in your earnings, you will inevitably be pulled above that £150,000 threshold.”
Over the same period, the SFC has forecast the number of people paying income tax in Scotland will rise from 2,523,400 to 2,676,500. The amount of cash raised from income tax is forecast to go from £11.452 billion in 2018-19 to £13.805bn in 2023-24.
Tory MSP Adam Tomkins questioned why income tax receipts are only set to rise“relatively modestly” at the same time as the number of top rate taxpayers is forecast to rise “very significantly”.
Professor Alasdair Smith of the SFC said this is because most of the increase in additional rate taxpayers would come from people whose income was previously just below the £150,000 threshold. Tory finance spokesman Murdo Fraser said: “Given the SNP want to suck as many people as possible into higher tax bands, it’s no surprise to see concerning projections like this. This is the sort of thing that drives wealth away, ultimately harming tax receipts and the economy.
“And all the while, our neighbouring economies with more competitive tax rates will reap the benefits.”