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Middle class Scots face paying higher income tax than their England counterparts if Rishi Sunak goes ahead with his planned 1p cut before the next election.
Experts said the change outlined by the Chancellor yesterday would see some better off workers north of the border paying more than 20 per cent more tax on parts of their earnings.
But in a headache for SNP First Minister Nicola Sturgeon the Chartered Institute of Taxation (CIOT) said the move would undermine her vow that Scots would pay less tax than those in other parts of the UK.
Unveiling a mini-Budget for the cost-of-living crisis, Mr Sunak pledged that the basic rate of tax in England will fall by a penny to 19p by 2024 – the first cut in 16 years and worth more than £5billion or an average of £170 a worker.
Scotland already has a 19p basic rate of income tax and different rate boundaries – and the Holyrood administration has pledged to keep them unchanged until the next Scottish Parliament election in 2026.
John Cullinane, the CIOT’s director of tax policy, said: ‘If Scottish Ministers didn’t follow suit with changes, then the UK changes would mean that no Scottish taxpayers would pay less income tax than their UK counterparts, undermining the Scottish Government position that its income tax policy ensures lower earners pay less tax than other parts of the UK.’
In a headache for SNP First Minister Nicola Sturgeon the Chartered Institute of Taxation (CIOT) said the move would undermine its vow that Scots would pay less tax than those in other parts of the UK.
Unveiling a mini-Budget for the cost-of-living crisis, the Chancellor pledged that the basic rate of tax in England will fall by a penny to 19p by 2024 – the first cut in 16 years and worth more than £5billion or an average of £170 a worker.
He added: ‘It is too early to know what the specific impact would be on Scotland of the Chancellor’s ambition to reduce the basic rate of income tax to 19p because we don’t know how the Scottish Government intends to respond.
‘Replicating the Chancellor’s policy would effectively mean widening the 19p starter rate of tax to include all taxpayers earning less than the higher rate threshold and the end of the 21p intermediate rate of tax.’
In Scotland, different income tax charges apply, with 19 per cent already the starter rate north of the border on earnings between £12,570 and £14,732 – rising to 20 per cent for those making between £14,732 and £25,688.
Mr Sunak yesterday also announced that fuel duty would be cut by 5p per litre, as well as an increase to the national insurance threshold of £3,000.
His decision to pre-announce a tax cut two years early was criticised by experts today, with Institute for Fiscal Studies (IFS) director Paul Johnson sharply criticising the hike in national insurance at the same time.
“His choice to increase NI rates and reduce the basic rate of income tax looks indefensible from an economic point of view, though one can see the political attractions,” he said.
Mr Cullinane added: ‘Once this year’s changes have been implemented, the impact of the Scottish Government’s 19p starter rate of tax will mean that workers earning less than £27,850 will be up to £21.62 better off compared to someone doing the same job for the same salary elsewhere in the UK.
‘However, today’s announcement does nothing to address the anomaly that will see Scots with earnings between £43,662 and £50,270 taxed at a marginal rate of 54.25 per cent on this portion of their income, compared with 33.25 per cent in the rest of the UK.’
Source: Daily Mail