Nicola Sturgeon hints at tax rise for higher earners

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Scottish workers would be hit by an increase of the income tax rate on those earning more than £24,000 under a series of proposals set out by Nicola Sturgeon ahead of next month’s Scottish budget.

With the country facing austerity, Brexit and an ageing population, Ms Sturgeon said it was time to ask “tough questions” about the amount of tax people pay.

Nicola Sturgeon. Picture: Jane Barlow/PA Wire

Nicola Sturgeon. Picture: Jane Barlow/PA Wire

The First Minister and Finance Secretary Derek Mackay laid out four different scenarios, which would use new Holyrood powers to vary rates and create new bands, as she promised a “proportionate and progressive” income tax system.

The four proposals will form the basis of talks with the other political parties as the SNP minority administration seeks to get enough support to get a budget through the Scottish Parliament.

One of the scenarios, which would see the number of tax bands increased from the three bands to six, was described by Ms Sturgeon as potentially more progressive than the others.

READ MORE: Are Scots willing to pay more tax?

Under that option, those earning up to £15,000 would see rates cut by a penny from 20 per cent to 19 per cent.

Those earning between £15,001 and £24,000 would pay the current basic rate of 20 per cent.

Then a new rate of 21 per cent would kick in for those earning between £24,001 and £44,290. Those earning between £44,291 to £75,000 would pay 41 per cent, a penny increase on the current higher rate.

Those earning between £75,001 to £150,000 would pay 42 per cent while those with salaries above £150,000 would be taxed at 50 per cent, a five pence increase on the current additional rate.

According to the Scottish Government document “The Role of Income Tax in Scotland’s Budget”, nurses, primary school teachers, social workers would see an increase to their income tax bills.

Although three of the four scenarios propose an increase in the rate at £24,000, the Scottish Government said that once UK Government plans to raise the tax free personal allowance in 2018/19 were factored in the “crossover figure” at which people began to pay more tax would be £31,000.

Unveiling the plans, Ms Sturgeon said: “When the increase to the personal allowance is taken into account, none of these approaches would see anyone earning up to £31,000 pay a penny more than they do now.

And in all four approaches, more than 70 per cent of all adults would continue to pay no tax at all or no more tax than they do today.”

The simplest approach was to maintain the three bands of basic, higher and additional rates – keeping the basic rate at 20 per cent for those earning between £11,850 and £44,290.

A penny would then be put on the other two bans bring the higher rate up to 41 per cent for those earning between £44,291 and £150,000. The additional rate would go up to 46 per cent from 45 per cent for those earning more than £150,000.

A further approach floated would see the creation of an extra band to create four bands. Those earning between £24,001 to £44,290 would pay 21 per cent. Those earning between £44,291 to £150,000 would be taxed at 41 per cent and those earning more than £150,000 would see an increase in the rate from 45 per cent to either 48 per cent or £50 per cent.

Another option would be to add a fifth band to the four band scenario with those earning between £75,001 and £150,000 being taxed at £42 per cent.

Scottish Tory leader Ruth Davidson said: “We support a competitive tax regime because we believe that will develop Scotland’s economy – boosting the tax income we need for our schools and hospitals. We don’t think it’s right that every Scot earning over £24,000 should have to pay more.”