Scottish government to raise taxes on higher earners Scottish government to raise taxes on higher earners

Scottish government to raise taxes on higher earners
29 Jan 2018

Scotland’s government is to raise taxes on higher earners and increase public sector pay, using its powers to set income tax rates for the first time.

While the top two rates of income tax will be raised by one percentage point to 41% and 46% respectively, the Scottish government says that 70% of Scottish taxpayers will pay no more than before, and 55% will pay less than elsewhere in the UK.

Scotland was given more powers to set its own income tax rates last year as the result of a promise made before the independence referendum from the UK in 2014. The Scottish government set income tax earnings thresholds that were slightly different from those elsewhere in Britain for the first time, but kept the same overall rates.

According to Reuters, the budget plan offers public sector workers such as nurses, firefighters and teachers earning less than £30,000 (US$40,242) per year a 3% pay rise. Those earning more than that will gain a 2% increase – a more generous proposal than that made by Westminster to relax a public sector pay cap in England and Wales.

Meanwhile, forecasts published with the budget showed that the Scottish economy is set to grow at a much slower rate than the UK’s as a whole, with annual growth set to reach only 1% in 2022, according to the Scottish Fiscal Commission (SFC). Oil and gas output are waning, and Scotland is suffering from the same slow productivity growth as the rest of the UK.

The SFC also highlighted the risk of an economic slowdown due to Brexit, a weaker outlook for global trade and an ageing population that is straining public services.

Scotland’s tax cuts have been criticised by Westminster and by the Scottish Chambers of Commerce, which says it is worried they could hurt investment. But finance secretary Derek Mackay attests the changes will make the tax system in Scotland fairer.

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.

Scotland’s government is to raise taxes on higher earners and increase public sector pay, using its powers to set income tax rates for the first time.

While the top two rates of income tax will be raised by one percentage point to 41% and 46% respectively, the Scottish government says that 70% of Scottish taxpayers will pay no more than before, and 55% will pay less than elsewhere in the UK.

Scotland was given more powers to set its own income tax rates last year as the result of a promise made before the independence referendum from the UK in 2014. The Scottish government set income tax earnings thresholds that were slightly different from those elsewhere in Britain for the first time, but kept the same overall rates.

According to Reuters, the budget plan offers public sector workers such as nurses, firefighters and teachers earning less than £30,000 (US$40,242) per year a 3% pay rise. Those earning more than that will gain a 2% increase – a more generous proposal than that made by Westminster to relax a public sector pay cap in England and Wales.

Meanwhile, forecasts published with the budget showed that the Scottish economy is set to grow at a much slower rate than the UK’s as a whole, with annual growth set to reach only 1% in 2022, according to the Scottish Fiscal Commission (SFC). Oil and gas output are waning, and Scotland is suffering from the same slow productivity growth as the rest of the UK.

The SFC also highlighted the risk of an economic slowdown due to Brexit, a weaker outlook for global trade and an ageing population that is straining public services.

Scotland’s tax cuts have been criticised by Westminster and by the Scottish Chambers of Commerce, which says it is worried they could hurt investment. But finance secretary Derek Mackay attests the changes will make the tax system in Scotland fairer.

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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