Scottish workers earning under £27,000 – currently around 55 percent of taxpayers – will contribute less income tax than their counterparts in the UK when new income tax thresholds are implemented on April 6. However, everyone earning more than this will pay more than their peers south of the Border, after SNP Finance Secretary Derek Mackay froze the point at which the higher rate kicks in at £43,430. The move, first announced back in October during the Scottish budget, sparked outrage among higher earners after UK Chancellor Philip Hammond raised the top rate of income tax to earnings over £50,000, a staggering £6,570 higher than Scotland. This effectively widens the gap between Scotland and the UK for higher rate taxpayers, who pay 41 percent in Scotland versus 40 percent in the UK.
For someone earning £45,000 in Scotland, they will fork out just under £500 more a year.
Those with a salary of £50,000 will be splashing out £1,500 more than in England, Wales or Northern Ireland.
At the time of announcing the Budget, the Scottish Government said freezing the threshold for higher earners would allow lower earners to be able to take home more before being taxed.
The starter rate of tax, which is set at 19 percent, has been increased at the same level as the UK to £12,500 while the basic rate, currently at 20 percent, will go up to £14,549.
This will effect 55 percent of Scottish taxpayers, although by only £20 a year, according to economists at the Fraser of Allander Institute.
They estimate that a worker on an income of £16,000 a year will pay £680 a year income tax in Scotland, versus £700 in the UK.
Steven Cameron, Pensions Director at Aegon, highlighted how the income tax changes will hit higher earners across the Border.
He said: “From 6 April, many people living in Scotland will be paying substantially more income tax than someone on equal earnings in the rest of the UK.
“In his October Budget, the UK Chancellor announced that from April, those earning up to £50k would not pay higher rate (40 percent) income tax.
“But as income tax bands and rates are ‘devolved’, this didn’t apply to workers in Scotland and the Scottish Finance Secretary dashed hopes of an equivalent rise for Scots.
“This left the higher rate tax threshold unchanged at £43,430, £6,570 lower than in the rest of the UK.
“This means people in Scotland start paying higher rate tax on earnings £6,570 sooner than their counterparts elsewhere in the UK.
“Many also pay income tax at higher percentage rates, which for earning above £43,430 in Scotland is 41 percent.
“Someone earning £50k in England, Wales or Northern Ireland would pay £7,500 in income tax from the 2019/20 tax year, while someone earning the same figure in Scotland would pay £9,044 which is £1,544 a year more or £128 a month extra.
“For many, this will look like a significant sum and many will be looking for the Scottish Government to demonstrate what extra services Scottish taxpayers are receiving for the difference.”
A Scottish Government spokesman said the changes will still be beneficial for most workers in Scotland.
He said: “Most Scottish taxpayers will pay less income tax next year than if they lived elsewhere in the UK.
“People in Scotland continue to have access to a wider and better funded set of free-to-access public services than if they lived elsewhere in the UK, making Scotland the best place to live, work and do business.”
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