Thousands of Scots are facing higher tax bills after the SNP today confirmed the creation of a new 45 per cent ‘advanced’ rate of income tax.
Shona Robison, the deputy first minister and finance secretary, announced the move to MSPs as she unveiled the Scottish government’s latest budget.
The newly-created ‘advanced band’ will be placed on Scots who earn between £75,000 and £125,140.
Those who earn above £125,140 were also told they will be levied more, with the top rate of income tax in Scotland rising by 1 per cent next year to 48 per cent.
The changes came as the SNP-led Scottish government sought to fill a £1.5billion blackhole in its spending plans.
It means Scotland will have six income tax bands next year, while the rest of the UK has three.
Higher earners in Scotland will pay more than any other part of the country.
In her address to the Scottish Parliament this afternoon, Ms Robison swiped at Chancellor Jeremy Hunt’s tax cuts in his Autumn Statement last month.
‘He prioritised tax at the expense of public services,’ she said of Mr Hunt’s cut to National Insurance.
‘And, disgracefully, the motivation for this choice is, obviously, not the national interest but instead the electoral interests of the Tory Party ahead of the coming general election.
‘Be in no doubt, while Scotland remains in this Union we will continue to pay the price of Westminster austerity.’
She branded the Autumn Statement a ‘worst-case scenario for Scotland’ and continued the SNP’s push to break-up the UK.
Ms Robison claimed Mr Hunt’s package at Westminster showed why Scotland ‘must walk a different path’.
The hike in income tax appeared to have been made necessary, in part, by Scottish First Minister Humza Yousaf’s determination to meet a pledge to freeze council tax.
Ms Robison confirmed this afternoon the Scottish Government would fully fund a proposed council tax freeze, providing local government with the equivalent of a 5 per cent rise.
‘I will fund an above inflation 5 per cent council tax freeze – delivering over £140million of additional investment for local services,’ she told MSPs.
‘Combined with the other support being provided to local government, this will increase their overall funding by 6 per cent since the last budget, taking local government funding to a new record high of over £14billion.’
In other Budget measures, councils will be provided with £1.5million to wipe out school meal debt incurred by pupils across Scotland.
Business rates for premises valued at less than £51,000 will be frozen in Scotland while hospitality businesses in Scotland’s islands will be given 100 per cent relief.
Funding for NHS boards will rise by £550million – or 4.3 per cent – and amounts to £13.2 billion.
The three lowest rates of income tax in Scotland will see no increase to their rates while the starter and basic rate bands will increase by the level of inflation.
Ms Robison told MSPs the changes to income tax would raise an extra £82million next year, with income tax forecast to bring in a total of £18.8billion in 2024-25.
Paul Johnson, director of the Institute for Fiscal Studies, pointed out that £82million was ‘equivalent to less than 36 hours of Scottish NHS spending’.
He also noted how Scots earning between £100,000 and £125,000 will ‘now face a marginal tax rate of 69.5 per cent’.
The Scottish Fiscal Commission, an independent watchdog, estimated the SNP’s income tax decisions in recent years would add £1.5billion in revenue in 2024/25 compared to if it had followed the rates and bands implemented by Westminster.
Ms Robison claimed Scotland was at the ‘upper limit of mitigation’ of UK Government policies.
‘Quite simply, we cannot spend money that we do not have and we cannot mitigate every cut made by the UK Government,’ she said.
‘We are at the upper limit of the mitigation that can be provided within the devolved settlement.
‘We will always do our best with the powers that we have, but they are simply no substitute for independence.’
Reacting to Ms Robison’s Budget, Scottish Secretary Alister Jack said hiking taxes on bigger earners was ‘bad for our economy’.
‘Today’s Scottish budget widens even further the tax differential between Scotland and the rest of the country,’ he said.
‘Making Scotland the highest-taxed part of the United Kingdom is bad for our economy. It deters business investment and punishes hard-working people.
‘The Scottish Government has a record block grant yet wastes hundreds of millions of pounds.
‘It needs to take responsibility for its spending choices and the resultant self-inflicted budget black hole, rather than blaming the UK Government and penalising Scottish taxpayers.