This week’s Scottish Budget offers some crowd-pleasing measurers, but fails to deliver meaningful change or address the much bigger picture of Scotland’s long-term economic challenges, says ICAS CFO Chris Barber.
He explained that the Finance Secretary’s announcement to increase the amount at which the basic and intermediate income tax thresholds start by 7.4%, to £16,538 and £29,527 respectively, appears welcome news for low-income earners. However, at only £11 per year extra in their pockets, this hardly represents any difference to overall livelihoods.
Barber felt these threshold increases also won’t deliver a meaningful rise in fiscal revenue, given that 69% of Scotland’s income tax is raised from the top three tax bands.
With no change to the rest of the income tax bands in Scotland, more people will be dragged into higher tax bands as wages increase with inflation, and so will end up paying more tax. He said: “The greater number of income tax bands in Scotland compared to the rest of the UK also means that this fiscal drag is more pronounced. This coupled with no changes to the Land and Building Transaction Tax (LBTT) bands, means we will see greater tax bills for many people. We think there should be greater alignment with taxation in the rest of the UK – particularly around the intermediate and higher rate thresholds.”
Any Scottish taxpayer earning over £33,493 will now pay more income tax in Scotland than those in the rest of the UK.
