Hundreds of thousands of Scottish higher rate taxpayers will have £149 added to their income tax bills, the Scottish Fiscal Commission (SFC) has predicted.
Scotland’s independent fiscal forecaster said around 370,000 higher and top rate taxpayers would experience the rise in its analysis of the Scottish Government’s budget.
Kate Forbes froze the higher rate thresholds of income tax at £43,430. But the basic and intermediate rate will increase by inflation.
Ms Forbes, who was standing in for disgraced former Finance Secretary Derek Mackay, said her policy would result in 56% of Scottish taxpayers paying less than they would elsewhere in the UK.
“To cement the progressivity of our tax system we will increase the basic and intermediate rate threshold by inflation to protect our lowest and middle earning taxpayers. The higher and top rate thresholds will be frozen.”
But a 140-page SFC document outlining budget forecasts estimated that pay rises would mean 19,000 intermediate rate taxpayers would now become higher rate taxpayers.
— Scottish Fiscal Commission (@scotfisccomm) February 6, 2020
They would pay an extra 20% on each pound earned up to a maximum increase of £149.
The Scottish Government’s budget document said that “on current incomes” no Scottish taxpayer will pay more than they did last year.
The SFC, however, looked at the impact that pay rises would have on higher earners.
“We estimate that there are around 370,000 higher and top rate taxpayers who will see an increase in their income tax liabilities of £149,” the SFC document said.
No increase in income tax rates
Ms Forbes said: “There will be no increase to any of the rates of income tax this year. No Scottish income taxpayer will pay more income tax in 2020/21 on their current income than they do this year.”
The SFC report said Scotland’s annual income from taxation is expected to rise to more than £19 billion in under five years.
Released in conjunction with the Scottish budget, the SFC’s forecast suggests a jump in the amount of total tax from £15.2 billion to £19.1 billion by 2024-25, with income tax alone bringing in an extra £51 million.
The SFC report said: “The Scottish Government has announced that in 2020-21 the higher rate threshold will be frozen at the same rate, £43,430, as in 2019-20.
“We expect this freezing of the higher rate threshold, relative to our baseline assumption of increasing it in line with inflation, to raise an additional £51 million for the Scottish budget in 2020-21.
“This policy means there will be more higher rate taxpayers in Scotland than would otherwise have been the case.”