Fears that Scotland’s widening UK tax gap could damage recruitment Fears that Scotland’s widening UK tax gap could damage recruitment

Fears that Scotland’s widening UK tax gap could damage recruitment
19 Dec 2018

Scotland’s draft Budget has been slammed for widening the tax gap between Scotland and the rest of the UK over fears it could make it more difficult for employers to recruit talent.

The move will see workers who earn £50,000 (US$63,131) paying around £1,500 (US$1,894) more in income tax than people in the rest of the UK.

Finance Minister Derek Mackay confirmed that he would not follow British Chancellor Philip Hammond’s example and raise the threshold at which the higher 40% tax rate kicks in to £50,000 (US$63,131). Instead, the aim is to freeze the Scottish higher tax rate threshold at £43,430 (US$54,836), where people are already taxed at 41%. The freeze will affect an estimated 367,000 people.

Charles Skene, visiting Professor of Entrepreneurship at the Robert Gordon University in Aberdeen, told the Press and Journal: “Due to North Sea oil and gas, we in the north east have had a higher percentage of higher-earning people working here in the oil and gas sector. Making the tax rates less attractive than the rest of the United Kingdom is in my view a serious error.”

Scottish Conservative finance spokesman Murdo Fraser also attested that the budget penalised hardworking families. “It seems the expert warnings that a growing divergence would make it harder to recruit talented people across both the private and public sector have been roundly ignored,” he said.

On public sector pay, the Finance Secretary confirmed the Scottish Government’s policy to lift the existing 1% cap on wages. The deal will result in a pay rise of 3% for those earning up to £36,500 (US$46,086). Pay increases will be capped at 2% for people earning between £36,500 (US$46,086) and £80,000 (US$101,010), and any increase for those earning more than £80,000 will be limited to £1,600 (US$2,020).

But Scottish Trades Union Congress general secretary Grahame Smith said the plan failed to recognise the urgency of increasing public sector workers’ wages. “We are deeply disappointed that Mr Mackay’s public-sector pay policy does nothing to make amends for a decade of pay cuts for public workers,” he said.

Mackay also confirmed a planned pilot of a new tax on out-of-town businesses would not be explored any further, following widespread opposition from business leaders, Herald Scotland reported.

Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

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Scotland’s draft Budget has been slammed for widening the tax gap between Scotland and the rest of the UK over fears it could make it more difficult for employers to recruit talent.

The move will see workers who earn £50,000 (US$63,131) paying around £1,500 (US$1,894) more in income tax than people in the rest of the UK.

Finance Minister Derek Mackay confirmed that he would not follow British Chancellor Philip Hammond’s example and raise the threshold at which the higher 40% tax rate kicks in to £50,000 (US$63,131). Instead, the aim is to freeze the Scottish higher tax rate threshold at £43,430 (US$54,836), where people are already taxed at 41%. The freeze will affect an estimated 367,000 people.

Charles Skene, visiting Professor of Entrepreneurship at the Robert Gordon University in Aberdeen, told the Press and Journal: “Due to North Sea oil and gas, we in the north east have had a higher percentage of higher-earning people working here in the oil and gas sector. Making the tax rates less attractive than the rest of the United Kingdom is in my view a serious error.”

Scottish Conservative finance spokesman Murdo Fraser also attested that the budget penalised hardworking families. “It seems the expert warnings that a growing divergence would make it harder to recruit talented people across both the private and public sector have been roundly ignored,” he said.

On public sector pay, the Finance Secretary confirmed the Scottish Government’s policy to lift the existing 1% cap on wages. The deal will result in a pay rise of 3% for those earning up to £36,500 (US$46,086). Pay increases will be capped at 2% for people earning between £36,500 (US$46,086) and £80,000 (US$101,010), and any increase for those earning more than £80,000 will be limited to £1,600 (US$2,020).

But Scottish Trades Union Congress general secretary Grahame Smith said the plan failed to recognise the urgency of increasing public sector workers’ wages. “We are deeply disappointed that Mr Mackay’s public-sector pay policy does nothing to make amends for a decade of pay cuts for public workers,” he said.

Mackay also confirmed a planned pilot of a new tax on out-of-town businesses would not be explored any further, following widespread opposition from business leaders, Herald Scotland reported.

Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

OTHER STORIES THAT MAY INTEREST YOU

Scotland lays new arrestment orders before Parliament

First Minister unveils Scotland's new programme for government

New devolved Welsh rates of income tax to come into force next year

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