Higher income tax rate frozen in Scotland

20 Feb 19

A proposal which will see increasing divergence in income tax rates between Scotland and the rest of the UK has been given the green light by the Scottish Parliament.

While the higher rate threshold was raised to £50,000 by chancellor Philip Hammond in his last budget, MSPs have backed the plan of the Scottish Government to freeze the threshold for taxpayers north of the border.

The salary at which Scots will start to pay the 41p higher rate will be frozen for a second year at £43,430 in a move which is expected to generate £68m in additional revenue.

The tax plan was backed by 61 votes to 52, with the six Scottish Green members abstaining.

Public finance minister Kate Forbes told the parliament that the policy would protect the lowest paid taxpayers and improve progressivity while strengthening the nation’s public finances.

“[It] will raise additional revenue to invest in public services, to tackle poverty and to support Scotland’s economy,” she said.

“It will also continue to protect lower-earning and middle-earning taxpayers, thereby making the system fairer and more progressive.”

However, the motion was opposed by Conservative and Labour members.

“We do not believe that it is fair to burden hard-working Scots with yet more taxes and to widen the income tax gap between Scotland and the rest of the UK,” said Conservative finance spokesman Murdo Fraser.

Scottish companies would struggle to attract talented staff as people were deterred by the tax system from coming to Scotland, and those already living in Scotland chose to leave, he warned.

Labour finance spokesman James Kelly said the government’s plan lacked ambition in tackling inequality and poverty. The higher rate band, which extends to salaries up to £150,000, was too wide, he said, and top rate taxpayers should face a 50p rate.

“It is simply unfair that high earners on six-figure salaries will pay less tax while councils face the prospect of having to make workers redundant,” he said.

Tomorrow, MSPs are expected to give their backing to the Scottish Government’s budget as a whole, after a deal struck with the Greens last month ensured the budget bill would be passed in return for concessions including increased funding for councils and a commitment to legislate for a discretionary local tourist tax.

Under the deal, legislation to replace the council tax is also to be introduced by the end of this parliament if agreement is reached between the parties at Holyrood.

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