Number of Scots paying higher income tax rates to reach almost 950,000
Analysis by the Scottish Fiscal Commission highlights the impact of ‘fiscal drag’
The number of Scots paying higher income tax rates has increased by more than 500,000 in the last decade and is set to reach almost 950,000 in the next two years, analysis shows.
The Scottish Fiscal Commission (SFC) said one in four taxpayers will be impacted next year alone.
And it said those currently earning the median full-time salary - £39,900 - could be dragged into the higher rate of 42 per cent by 2029/30.
Professor Graeme Roy, the body’s chairman, said public sector workers are increasingly having to pay the higher rates of tax, “whether it be nurses, whether it be teachers”.
The Scottish Conservatives accused the SNP of “clobbering middle-income workers”.
Craig Hoy, the party’s finance spokesman, said: “Tens of thousands more nurses, teachers and police officers on relatively modest salaries are being dragged into the higher rate, which was never intended for them.
“The SNP’s vindictive tax on aspiration is stifling Scotland’s economic performance by making it harder and harder for businesses to recruit and retain skilled individuals.”
The SFC said it expects 835,000 people to pay income tax at “at least” the higher rate in 2026/27, which amounts to 26.3 per cent of taxpayers.
That compares to 304,000 (12.1 per cent) who paid higher rate taxes in 2016/17. By 2028/29, the number paying the higher rate or above could increase to 948,000, making up almost three in 10 (28.7 per cent) of taxpayers, the experts forecast.
The draft Scottish Budget, published on Tuesday, froze all income tax thresholds other than for the basic and intermediate rates.
Professor Roy said freezing the threshold for higher rate bands means “we’re really beginning to see the effects of fiscal drag feeding through to the tax base in Scotland”.
Further analysis by the SFC, based on average earnings growth forecasts, found someone in Scotland earning £39,743 today might be expected to be a higher rate taxpayer in 2029/30.
Finance Secretary Shona Robison said it would have been “extraordinarily expensive” for the government to increase the thresholds at which people start paying higher rates of income tax.
“The money was just not available to do that,” she told BBC Radio Scotland on Wednesday.
“Around three-quarters of taxpayers are expected to be unaffected by freezes to the higher rate thresholds, and of course people are getting a range of supports, many of a universal basis.”
Anyone earning more than £33,493 in Scotland will pay more tax than elsewhere in the UK, and someone earning £50,000 will pay £1,496 more.
First Minister John Swinney said 55 per cent of taxpayers “are paying less tax in Scotland than if they lived in the rest of the United Kingdom” following the decision to increase the basic and intermediate rate thresholds.
But opposition parties at Holyrood criticised the “marginal” impact this will have.
Labour finance spokesman Michael Marra said for most people, the changes will save them “potentially about 70p a week”, adding: “You couldn’t buy a Mars bar for that.”
Tax expert Dan Neidle, a member of the Scottish government’s tax advisory group, said it “may be the smallest income tax cut in history”, and was “all about politics”.
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