MSPs have voted for the first-time ever on income tax rates and bands in Scotland. This historic Holyrood vote means that the Scottish Government will not increase the point at which the higher 40p tax rate kicks in, resulting in different tax bands in Scotland and in the rest of the UK for the first time. The Conservatives have warned that the move will damage Scotland by making it the “highest taxed part of the UK”.
The UK Government had already confirmed that they will raise the threshold where the 40p tax rate starts to £45,000 in April, but this weeks’ vote means that it will remain at £43,000 North of the border.
MSPs voted by 61 to 55 to back the freeze in the tax threshold, with six abstentions. Labour and the Liberal Democrats had both called for an increase in the basic rate of income tax to 21p from the current 20p in an attempt to raise additional cash for public services. Labour had also called for the reintroduction of a 50p top rate of tax for those earning £150,000 a year or more, but this was also rejected by the Scottish Government.
SNP ministers at Holyrood had planned to increase the threshold for the 40p tax rate in line with inflation, but they reached an agreement with the six Scottish Green MSPs to keep it at £43,000. The Conservatives have claimed that one in seven income-tax payers in Scotland will be worse-off compared to the rest of the UK, and that some 374,000 people in Scotland will pay more tax than if they lived South of the border.
In 2017/18, assuming that the taxpayer is in receipt of the UK Personal Allowance £11,500, the tax rates and bands will be:
