16 February 2017

Higher-rate Scottish taxpayers to pay more income tax

After recent debate at Holyrood, higher-rate taxpayers in Scotland are now to pay £400 more in income tax than the rest of the UK.

The Budget (Scotland) Bill for 2017/18 was debated at Holyrood on 2 February 2017. Prior to the debate, we were aware that it was the Scottish Government’s intention for Scottish higher-rate income taxpayers to pay more than their English, Welsh and Northern Irish counterparts. However, the recent debate unfortunately delivered additional bad news for Scots.

From 6 April 2017, the higher-rate threshold for Scots on employment income (note, only employment income) was to be £43,430. However, at the recent debate it was proposed that this threshold should be frozen at £43,000. This is the same threshold as the 2016/17 tax year, so the freeze is a cut in ‘real terms’, whilst the rest of the UK will see the higher-rate threshold rise to £45,000. This change will see higher-rate tax earning Scots £400 worse off.

In addition to this, and to complicate matters even further, the revised threshold will not apply to savings and dividend income. This threshold will remain in line with the rest of the UK at £45,000.

In December 2016, it also came to light that, at its first attempt in identifying who was and wasn’t a Scottish taxpayer, HMRC missed 420,000 individual taxpayers. Let’s hope they make a better go of getting income tax positions right next time!

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