New Scots tax system could ‘move further’ from UK

Derek Mackay says the changes will help fight austerity
Derek Mackay says the changes will help fight austerity
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Scotland's tax system could "move further" away from the system in the rest of the UK in future years, a leading investment house has warned.

As the new tax system comes into effect tomorrow, Paul Embleton, Head of Brown Shipley’s Edinburgh office, has urged savers to liaise with financial advisers to ensure they make the most of allowances and reliefs under the new regime north of the border.

Scots workers earning £26,000 or more will pay more in tax than their counterparts south of the Border, under an overhaul of the existing rates and bands.

Earners below this level, a majority of workers, will pay slightly less.

Read more: Scots middle earners face unknown tax future

Mr Embleton said the changes will have a "notable impact" on earners.

"While the new starter rate of income tax of 19% on earnings between £11,850 and £13,850 might provide some limited relief to the finances of younger people and lower earners, overall the changes will mean that anybody earning above £26,000 will pay more income tax than in the rest of the UK," he said.

“Scottish savers and investors now enter a more complex environment, as the new income tax rates and bands set a precedent for Scotland that could well see Holyrood move further from the system in the rest of the UK in future years.

"With that in mind, investors should clarify what they are entitled to with their financial adviser to make full use of the available allowances and reliefs.”

Read more: Most Scots back SNP income tax plans, says poll
Finance Secretary Derek Mackay said the £200 million raised by the tax changes will help fight austerity and provide vital cash for public services.

But opponents said the move broke an SNP election pledge not to raise the basic rate of income tax and would hurt rather than spark Scotland’s slug ish economy.

The plans will see two extra bands added to the in come tax system, on either side of the basic rate – a 19p “starter” rate for lower earners and a 21p “intermediate” rate for those on middle incomes.

This, coupled with an in crease to the tax-free allowance included in the UK budget, will see 70 per cent of Scots pay less tax in the coming year than they do now, while 30 per cent will pay more.

The changes will also add 1p to each of the higher and additional rates, making them 41p and 46p respectively, while limiting increases to the higher rate threshold to raise extra funds for local services and a public sector pay deal.