
[ad_1]
The Scottish Government has raised taxes for the highest earners in the country, widening the gap with the rest of the UK as it seeks to boost incomes and offset the impact of rising inflation and wage settlements.
The pro-independence Scottish National Party, which governs at Holyrood in co-operation with the Greens, has stuck to a progressive tax system, leaving rates for low-paid workers unchanged.
But in Thursday’s Budget, which was delayed after some details were leaked to the BBC, Scotland’s Deputy First Minister John Swinney lowered the level at which the highest tax rate is charged from £150,000 to £125,140.
The decision will push more Scots into the top rate of tax and matches a similar move by UK Chancellor Jeremy Hunt when he presented his Autumn Statement in November.
Swinney set the top rate of tax at 47 per cent, up from 46 per cent and compared to 45 per cent in the rest of the UK. He increased the top rate income tax band by one percentage point to 42 percent.
“These tax decisions try to strike a balance between ensuring enough money for public spending and adapting to the challenging economic conditions facing families and businesses,” Swinney added.
A widening gap in the top rate of tax compared to England is likely to lead to a modest rise in incomes as the country has fewer workers in the highest earning brackets. It could also reignite the debate over whether higher tax rates will make Scotland a less attractive place to invest.
Ahead of the Budget, economists at the Fraser of Allander Institute, a University of Strathclyde think-tank, estimated that lowering the top rate cap could raise just £40mn in additional revenue.
Alex Docherty, partner and head of private client tax at Johnston Carmichael, said: “One of the losers today is obviously the wealthiest of the Scottish population, and it will be interesting if that creates any behavioral responses as Scottish tax continues to diverge.”
Docherty added that ahead of Thursday’s Budget, a middle-income earner in Scotland earning £50,270 would pay £1,546 more than the rest of the UK. From April, that will rise to £1,611.88, she said.
Swinney also announced a 50 per cent increase in Scotland’s Additional Dwelling Supplement, a levy paid on additional homes as part of the country’s Land and Buildings Transaction Tax (LBTT), equivalent to stamp duty in England.
The move, which the Scottish Government said would raise £34mn, warned it would hurt the property market by penalizing landlords and owners of second homes. Stuart Matheson, head of tax at consultancy EY in Scotland, said the tax hike “could act as a disincentive for people looking to invest in property”.
Meanwhile, Swinney said the Scottish Government would divert £20mn set aside for a second independence referendum towards a fuel insecurity fund set up to help vulnerable households struggling with energy bills.
The UK Supreme Court ruled last month that Scotland’s Parliament did not have the power to legislate for a referendum without the consent of Westminster.
[ad_2]
Source link