Will There Be A Decrease in the Scottish Income Tax Rate?

Will There Be A Decrease in the Scottish Income Tax Rate?

Nick Robinson

Nick Robinson

Feb 02, 2016 | Taxation

Higher earners in Scotland (those who earn over £42,385) pay a 40p income tax rate – just like those in the rest of the UK. However, now that Holyrood has new tax powers (which come into effect in April), Ruth Davidson (the Scottish Tory leader) wants to lower this rate in order to ease the pressure on what she calls ‘the squeezed middle’. And an advisory group has given her some ideas on just how to do that.

Holyrood Palace

The group is the Independent Commission for Competitive and Fair Taxation in Scotland, and they have argued that changing the 40p rate to a 30p one would mean that, in the end, more people would become aspirational, and aim for better jobs – or even start businesses themselves – and therefore the shortfall in the tax that the government would bring in would soon be made up; it could, they say, even exceed initial expectation.

Another recommendation that the group made was that council tax on large properties be increased, but that business rates are frozen. These changes – or non-changes as the case may be – would all go towards helping those who are most taxed. The end conclusion was that, when affordable, tax rates should be lowered.

Ms Davidson has backed these ideas, and is keen to bring the changes in as soon as possible. Plans for lowering tax rates will most likely be seen in the party’s manifesto which will be created for May’s Holyrood election.

Not everyone is so keen on the idea, however. Many have suggested that these changes will only benefit the wealthy, and that those who were already paying the higher rate would not see much of a difference. Opponents are also worried that a change like this in Scotland, but not in England, will cause problems within and between the two countries.

Nicola Sturgeon (the First Minister of Scotland) also wants to look at potentially changing tax levies, but she has not spoken out as to how to plans to do this – if at all. She has said that she wants to make taxes more progressive, and it is possible that this will happen through the wealthy paying more tax and the poorer paying less so that tax levels seem to even out, but this also worries people. The Independent Commission for Competitive and Fair Taxation in Scotland warn that this will simply make entrepreneurs and those with the ability to create wealth in Scotland move elsewhere, leaving the poorer workers to pick up the tax tab.

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