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Over half a million now paying SNP’s higher rate of tax

By Michael Blackley Scottish Political Editor

MORE than half a million Scots workers are now paying the SNP’s punishing higher rate of income tax.

The number dragged into paying the higher rate, now set at 42p, has rocketed by 74 per cent since Holyrood gained full control of income tax in 2016.

The rate at which workers are falling into the higher band is nearly three times that of the UK as a whole.

The SNP’s decision to freeze the threshold for paying more than the basic rate, at a time when it was repeatedly increased south of the Border, means a record 510,465 now pay more.

The Scottish Government’s own economic forecaster predicts the number paying the higher rate will hit nearly 750,000 within five years – nearly one in five workers and almost a quarter of all people who pay tax.

SNP ministers are considering widening the divergence with the UK even further by introducing a new band between the higher and top rates. But SNP sources admitted that the move, announced by Humza Yousaf during the party leadership contest, could end up raising far less than initially expected.

Economists also warned that the move could lead to more people leaving Scotland or finding other ways to cut their tax bill, such as putting money into their pension.

Tory business spokesman Jamie Halcro Johnston said: ‘Refusing to increase the bands in line with rising wages amounts to another stealth tax rise on hard-pressed middle-income Scots. It is both unfair and counterproductive to ask them to pay for the SNP’s inability to manage their budget.

‘This has to stop or it will do untold damage to our economic competitiveness and the incomes of hard-working Scots.’

According to the Scottish Fiscal Commission (SFC), which provides economic forecasts to SNP ministers, an estimated 510,465 people now pay the 42p higher rate, 11 per cent more than in 2022-23.

The total has increased by 74 per cent since 2016-17, when it was paid by 293,800 workers. The SFC said the number paying the 40p higher rate south of the Border, which is charged on earnings above £50,000, has increased by only 27 per cent over the same period.

It also forecasts that the number of higher rate taxpayers will rise to 735,927 in Scotland by 2028-29. Professor Graeme Roy, chairman of the SFC, said no modelling had been carried out to predict the impact of a new tax band.

But he added: ‘The amount of revenue you raise at that top end for the same penny increase will be less than you would do further down the income distribution.

‘The behavioural changes increase as you move up the income distribution because typically it is the case people can change their tax affairs more easily when you are on higher earnings.’

A Government source said, according to estimates, a 44p rate between £75,000 and £125,000 would bring in less than £88million. The STUC has estimated £200million.

A Government spokesman said tax policy ‘will continue to be guided by our fair and progressive approach’.

‘This will do untold damage’

moRE and more Scots are being sucked into the morass of punitive taxation. Half a million now pay the 42p higher rate, with that figure set to soar to 750,000 within five years. High-tax Holyrood is swallowing up Scotland’s wealth.

SNP and Green ministers assume higher earners will sit back and take this, that they have nowhere else to go. in fact, higher earners are more likely to be skilled graduates, in demand all over and particularly south of the Border.

While moving to a foreign country would involve costs, paperwork and stress, relocating to England would be relatively straightforward and would make financial sense in the long run. The First minister must realise: he needs these people. if they go, their revenue, skills, businesses and job creation all go with them.

meanwhile, thousands will be putting increasing sums into their pensions in order to avoid handing over more of their hard-earned salary to the tartan taxman.

it says everything you need to know about Scottish politics that aspiration and achievement are seen as things which must be punished rather than encouraged.

Scotland cannot and will not grow its economy until it breaks free from the mediocre mindset that says we must ratchet back our expectations. Settle for dismal lives of managed decline, our capacity for progress held back by excessive taxation, regulation and state control.

We know how to achieve economic growth. You back enterprise by cutting red tape, reducing fiscal burdens and fostering competition. You generate wealth by allowing people to keep more of their own money, which brings revenue to the Scottish exchequer and prompts consumers to spend more in the private economy. Scotland has the talent and resources to succeed. What it lacks is a government that believes in success.

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2023-05-27T07:00:00.0000000Z

2023-05-27T07:00:00.0000000Z

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