Scottish Government Increases Income Tax

The Scottish government is introducing a new range of tax bandings that will see bigger tax bills for many expats who pay tax at home.

Any expat who is tax resident in Scotland will pay income tax at the new rates from April 2018.

The move could prove bad news for oil sector workers and expat landlords.

From the start of the next tax year, Scotland will have five tax bands instead of the usual three in the rest of the UK.

The measure is the first time a British devolved government has raised income tax, and was announced as part of the Scottish Nationalist Party draft Scottish Budget for 2018 -19.

The changes mean 45% of Scottish workers – around 1.1 million people – will pay more income tax than if they earned the same salary in England. The total includes 800,000 basic rate taxpayers whom the SNP promised to protect in last year’s Holyrood election.

The lower rate band is equivalent to a tax saving of 38p a week or £20 a year.

Scotland already has a national stamp duty that differs from the UK.

High taxes will drive jobs away

Tories argued that the SNP could have raised the £200 million the new rates of income tax are expected to collect by cutting costs.

Economist Arthur Laffer commented that there are “clear disadvantages” to living in a Scotland with higher taxes than the rest of the UK and that the SNP government “needs to understand you cannot distribute more than you can produce.”

“Scotland has many well-paid jobs and you cannot grow an economy on low-paid jobs. You can only change that by investment, not increased taxation that ends up doing nothing to boost the economy,” he said.

His Laffer Curve theory argues lower taxes can increase growth and revenues for the public purse, but warned the tax hike will “drive businesses and skilled workers” out of the country.

Scottish Income Tax Rates – April 2018

EarningsBandTax rate
£11,850 – £13,850Starter19%
£13,851 – £24,000Basic20%
£24,001 – £44,273Intermediate21%
£44,274 – £150,000Higher41%
More than £150,000Top46%

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