Defence Secretary Gavin Williamson has launched a review to counter measures that could see armed forces personnel in Scotland pay higher taxes than those elsewhere in the UK.
Around 8,000 members of the armed forces are set to be affected by the change after the Scottish Government brought in new income tax bands and increased tax levels.
Mr Williamson said: “The SNP’s tax hike unfairly hits 70 per cent of our brave and loyal service personnel based in Scotland, leaving thousands of them out of pocket. This is wrong.
“I am working to ensure that those who are affected do not feel they are being punished by serving in Scotland.
“We are urgently reviewing how we can counter this unjustified raid on the pay packets of our armed forces.”
Last month’s budget changes will see higher earners pay more and lower earners pay less. The new five-band system creates a 19p “starter” rate for lower earners and a 21p “intermediate” rate for earnings of more than £24,000.
The higher and additional rates will also be increased to 41p and 46p respectively. Analysis says that those earning more than £26,000 will pay more tax in comparison with their counterparts in the rest of the UK.
In the armed forces it is thought a staff sergeant would pay an extra £117 a year in Scotland. An army major would pay an extra £660 while a lieutenant colonel would pay £863 extra. A full colonel would have to pay an extra £1,013.
“Our servicemen and women make a huge contribution to the communities and the economy of Scotland,” said Scotland Secretary David Mundell. “The Scottish Government’s decision to make Scotland the most highly taxed part of the UK means they would be penalised for being stationed here.”
Hundreds of extra service personnel in the British Army, Royal Navy and Royal Air Force are due to move to Scotland in the coming years, with many not able to decide where they are posted.
A Scottish Government spokesman said: “Keith Brown, cabinet secretary for the economy, jobs and fair work, wrote to the Defence Secretary in February with an offer to consider constructive proposals by the UK government to address the differential taxation of military personnel. He was clear that any proposals must respect the Scottish Government’s income tax policy, and in particular should not disadvantage those earning under £26,000 who will pay less under our proposals. It is disappointing that no response has yet been received.
“The new starter rate we are proposing, combined with an increase in the personal allowance, will result in 70 per cent of income taxpayers paying less than they do this year for a given wage, and 55 per cent of Scottish income taxpayers will pay less than people earning the same amount and living in the rest of the UK.”