Scotland resists English example on 40p tax threshold

22 Mar 16

George Osborne’s decision to raise the threshold for the higher 40p rate of income tax will not be followed in Scotland if the Scottish National Party wins May’s Holyrood election, first minister Nicola Sturgeon said today.

To rather greater surprise, Sturgeon also promised that the SNP would ensure that no-one in Scotland would face a higher bill when Holyrood takes full control of Scottish bands and rates of income tax in April next year.  Thresholds would rise in line with inflation and the 45p additional rate would be left unchanged.

Her plans were immediately attacked for their caution by other Scottish party leaders. Labour’s Kezia Dugdale said the SNP had had the chance to be bold but had “bottled it.” Willie Rennie of the Liberal Democrats called the package “pathetically timid” while the Greens’ Patrick Harvie said: “To finally win these powers and then not use them is extraordinary."

Scottish TUC general secretary Grahame Smith said: “The STUC accepts that raising taxes is not a pursuit politicians find attractive. But if the Scottish Government can't summon the courage to propose major progressive change at this moment in time, we have to ask if it ever will?"

Only the Conservatives, who have argued against Scotland levying higher taxes than elsewhere in the UK, took a different tack. Scottish Leader Ruth Davidson said: “Nicola Sturgeon has confirmed today that she wants to make Scotland the highest taxed part of the UK.”

Sturgeon promised that the SNP, if returned to power, would freeze the basic rate throughout the next parliament, exempt the first £12,750 of salary from income tax by 2021/22, and set the higher rate threshold on a year-by-year basis.  The SNP, she said, did not currently plan to increase any of the existing tax rates.

“By adopting a different path to the UK government we could generate more than £1bn of additional revenues, enabling us to protect the public services we all rely on. We believe that this proposal is reasonable, it is balanced and it is fair,” she said.

Meanwhile, Labour today unveiled plans to replace the council tax with a different form of property-based tax, promising that the reform would leave four households in every five better off.

The Labour plan, which would require a property revaluation for the first time in 25 years, would tax properties worth less than £180,000 at £450 plus 0.35% of house value. Homes above that worth would be taxed at £450 plus 0.9% of value, with a cap at £3,000 per household and 3% year-on-year increase.

All the main parties bar the Conservatives served on a broad-based commission which insisted, in its report late last year, that the council tax should be scrapped. Unexpectedly, Sturgeon said earlier this month that a returning SNP government would amend rather than dump the tax.

  • Keith Aitken
    Keith Aitken

    covers Scottish affairs for Public Finance from Edinburgh. He was formerly economics editor and chief leader writer on The Scotsman and now has a busy freelance career as a writer, broadcaster and event chair.

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