Income tax rates frozen as Derek Mackay vows to protect lower earners

- Advertisement -

Income tax rates in Scotland will remain the same after Finance Secretary Derek Mackay resisted calls to reduce the gap compared to the rest of the UK.

He revealed the majority of taxes will remain the same in his draft budget for 2019-20 after last year’s higher-rate income tax increase but announced a below-inflation cap on business-rate rises.

Mr Mackay had faced calls in the lead-up to the budget to reduce the gap between the tax rates in Scotland compared with the rest of the UK after Philip Hammond’s autumn Budget raised the threshold for the higher rate of income tax from £46,350 to £50,000.

This means Scottish workers will still pay income tax of 41p in the pound when they start earning more than £43,430 a year while the highest earners will continue paying 46% on incomes above £150,000.

Pledging to protect lower earners, Mr Mackay confirmed the thresholds of the 19% starter rate and 20% basic rates have increased with inflation but the 21% intermediate rate for incomes above £24,944 remains the same.

Mr Mackay said: “The Scottish Government can not completely protect Scotland from the recklessness of the UK Government but the decisions was have taken in this Budget ensures we protect what matters most.”

He added: “As a result of these decisions, we have been able to invest in essential public services, particularly the NHS, while ensuring 55% of income taxpayers in Scotland pay less tax than those earning the same income in the rest of the UK.

“Taken together with the personal allowance, 99% of taxpayers will pay less income tax next year on the same income.”

The budget document cites the Scottish Fiscal Commission, which says freezing the higher-rate threshold will raise an additional £68 million.

Any Scottish taxpayers earning more than £26,990 per year will pay more in tax than peers south of the border, with a worker earning £50,000 now paying approximately £1,500 more than someone elsewhere in the UK.

Scottish Conservative shadow finance secretary Murdo Fraser said: “It seems the expert warnings that a growing divergence would make it harder to recruit talented people across both the private and public sector have been roundly ignored.

“That’s the price of living in the SNP’s Scotland.”

Mr Mackay also announced a below-inflation cap of 2.1% on business rate increases.

He said: “Last year, I limited the increase in business rates to CPI inflation and this year I will go further.

“I am announcing today that we will cap the increase in the rates poundage in 2019-20 in Scotland – at below inflation level of 49 pence, committing the increase to 2.1%.

“This will ensure that over 90% of properties in Scotland and all small and medium-sized businesses will pay a lower poundage than they would in other parts of the United Kingdom.

“I can also confirm that I will continue to up-rate the poundage in line with CPI for the remainder of this parliament.

“Our package of business rates relief including the small business bonus is the most generous anywhere in the United Kingdom, worth an estimated £750 million in 2019-20, and continuing the growth accelerator will give us a further competitive advantage.”

- Advertisement -
- Advertisement -
- Advertisement -

Latest Stories

- Advertisement -

UK News

- Advertisement -
- Advertisement -

Read the latest free supplements

Read the Town Crier, Le Rocher and a whole host of other subjects like mortgage advice, business, cycling, travel and property.