Budget 2016: High-earning Scots to miss out on Osborne's tax breaks

THE Scottish Government last night signalled that Scotland's middle classes are likely to lose out on George Osborne's tax breaks for the better paid.

Deputy SNP leader Stewart Hosie hit out at George Osborne for failing to meet his own financial targets. Pic Greg Macvean
Deputy SNP leader Stewart Hosie hit out at George Osborne for failing to meet his own financial targets. Pic Greg Macvean
Deputy SNP leader Stewart Hosie hit out at George Osborne for failing to meet his own financial targets. Pic Greg Macvean

A statement issued by the Scottish Government said ministers did not consider it to be the “right time” for higher earners to be taxed less.

The Scottish Government statement was backed up by the SNP’s treasury spokesman Stewart Hosie when he was questioned about the Chancellor’s plans.

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During yesterday’s budget, Mr Osborne announced that the higher rate tax of 40 per cent will start to be paid at £45,000 rather than the current threshold of £42,385.

But with Holyrood about to be handed powers over setting income tax bands and rates, it is up to the Scottish Government whether the move will be replicated north of the Border.

Around 372,000 higher rate taxpayers in Scotland – around 15 per cent of Scotland’s total number of taxpayers – would gain several hundred pounds if Nicola Sturgeon did decide to adopt Mr Osborne’s initiative.

Of these, around 53,000 are workers earning between £42,385 and £45,000 who would see their status change to basic rate taxpayers rather than higher earners.

With the May election looming the SNP is expected to announce its plans for using new income tax powers that were formally accepted by the Scottish Parliament last night.

However, the chances of the tax break being passed on to these individuals looked remote last night.

A Scottish Government statement said: “Ministers have been clear that they do not consider this to be the right time for higher earners to pay less tax.

“We have frozen tax rates for 2016-17 and we will set out proposals for 2017-18 in due course.”

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The Scottish Government stance was backed up by Mr Hosie, who said: “I am saying very clearly an above inflation rise in 40 per cent threshold when you are taking money from some of the poorest people in Scotland strikes me as a return of the nasty party.”

The Chancellor also announced a rise in the tax-free personal allowance to £11,500, a policy that will benefit an estimated 31 million workers across Britain.

Announcing his income tax break, Mr Osborne claimed to have produced a budget for “working people”.

“I can tell the House that from April next year I’m going to increase the Higher Rate threshold to £45,000,” the Chancellor said.

“That’s a tax cut of over £400 a year. It is going to lift over half a million people who should never have been paying the higher rate out of that higher tax band altogether. And it’s the biggest above inflation cash increase since Nigel Lawson introduced the 40p rate almost 30 years ago.” Finance secretary John Swinney claimed the Budget concealed a £1 billion cut in Scotland’s finances.

Mr Swinney said the spending cut was “buried in the detail of the Treasury Budget document”, leaving Scotland “in the dark about how much will fall on public services north of the Border”.

But Scottish Secretary David Mundell said there would be an additional £650 million available to the Scottish Government through the Barnett formula, as a result of action the UK government is taking on education and business rates in England.

“This, along with the power to set income tax rates and thresholds which the Scotland Bill delivers, will allow the Scottish Government to invest more in schools and hospitals in Scotland if it chooses to,” Mr Mundell said.

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Scottish Labour leader Kezia Dugdale said the Chancellor has “delivered tax cuts for the better off and spending cuts for everybody else”.

She added: “This is the last time a UK Chancellor will set the income tax rates for Scotland.

“With the new powers we will soon have in the Scottish Parliament, we will reverse George Osborne’s tax cut for the top 15 per cent and invest in our public services.”