First Minister Nicola Sturgeon has announced plans that income tax rates in Scotland will be frozen, with no increases in the basic, higher or additional rates.
However the significant cuts (reduction in income tax liabilities) which would result from the increases to the higher rate threshold proposed by the UK government would not be adopted in Scotland under the proposals. Their plans are that the higher rate threshold will be frozen in real terms and increased only in line with CPI inflation in 2017/18 and by no more than inflation until 2021/22.
The exact level of the higher rate threshold will be set out each year by the Scottish Government at the budget.
The Scottish Government’s believe their proposals are a more balanced approach which ‘will be fair to higher rate taxpayers while also generating additional revenue to be invested in Scotland’s public services such as the NHS’.
Under the proposals, the Scottish Government will ensure a Personal Allowance of £12,750 in 2021/22. If necessary, the Scottish Government will create a zero rate band to ensure that this protection for low income households is delivered.
Alongside the tax proposals, the First Minister published Scottish Government analysis that demonstrated any increase in the additional rate for top earners; whilst the UK rate remains at 45p; could put millions of pounds of revenue at risk. Accordingly, she confirmed that the additional rate will not increase in 2017/18, but that the analysis will be updated each year to inform decisions in future budgets.
Nicola Sturgeon said:
‘In setting out our proposals we have balanced the need to invest in and support our public services with a recognition that many households are still facing difficult economic challenges, and with the need to grow the Scottish economy.
We will not allow our public services to pay the price of an inflation busting tax decrease for the highest earning 10% of the population. We think that is the wrong choice and today we set out our alternative.
We will freeze the basic rate of tax for the duration of the next parliament. We do not believe it is right that those on low incomes are asked to pay for austerity. That does not tackle austerity, it simply shifts the burden to those who can least afford it.
No taxpayer will see their bill increase as a result of these Scottish Government proposals.
In 2017/18, instead of offering a large tax cut we will ensure the higher rate threshold rises only by inflation.
That means next year the threshold for higher rate taxpayers will go from £43,000 to £43,387’.
These proposals would introduce a difference between the amount of income tax payable by higher and additional rate taxpayers in Scotland to that paid by taxpayers with similar income in the rest of the UK.
Other parties have their own plans for the income tax rules for Scotland.
Internet link: Scotland Gov.News