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Changes to income tax introduced on Saturday mean Scotland will move further away from the system in the rest of the UK.
A new ‘advanced’ band of income tax for those earning over £75,000 has been introduced, along with other changes to tax rates.
This means there are now six tax bands in Scotland, compared to just three in England, Wales and Northern Ireland.
People who earn more than £28,867 in Scotland will pay more income tax than people with the same income in other parts of the UK.
However, the Scottish Government says the majority of income taxpayers in Scotland pay less tax than in other parts of the UK.
Until January this year it was 12p per pound on earnings of £50,270 from £12,571. However, a second reduction within a year would see the rate drop to 8p.
That means someone earning an average of £35,000 will pay nearly £800 less to the UK government than they did a year ago.
The Chartered Institute of Taxation said that although high-income earners were paying more tax in Scotland, the increase was largely offset by changes to national insurance across the UK.
The report said the new NI tax rate would mean an increase in take-home pay for Scots earning up to £112,900 compared to the tax year ending soon.
fiscal shackles
Since 2017 there have been differences in the income tax regime north and south of the border, but the latest changes have introduced a new 45% tax band in Scotland ranging from £75,000 to £125,140.
The Budget will also increase the top rate of tax for those earning over £125,140, with 48p deducted for every £1 earned above that level.
Additionally, the higher interest rate threshold will be frozen at £43,663 for four years, rather than rising in line with inflation.
A total of 114,000 people will pay the new advanced tax rate of 45%. This tax rate starts on wages above £75,000 and is taxed at 45p for every £1 above that level (42p for those in the lower bands).
Around 40,000 people are now expected to pay the top tax rate of 48% on incomes above £125,140. This is about 4,000 yen more than last year’s highest rate.
The SFC said this “fiscal drag” meant the number of people paying higher tax rates – currently over £43,662 – rose from around 300,000 eight years ago to 650,000 next year. Stated.
In 2016, just 12% of Scottish taxpayers paid higher tax rates, but this has now risen to 22%.
Around £1.5bn more will be raised in Scotland next year than if UK income tax rates were still in place, according to SFC figures.
For Scottish income taxpayers with incomes below £28,867, the benefit of paying tax in Scotland is very small – just £23 a year.
Above that level, Scots pay more tax than the rest of the UK. The amount is small at first, but increases as your income increases.
By the time they reach £50,000 a year, the highest salary for a non-promoted teacher or constable, they will be paying £1,542 more than the same salary south of the border.
A very high income earner of £200,000 will pay £7,478 more in tax than in the rest of the UK.
The Scottish Government has previously said the decisions in the Scottish Budget, including the new tax bracket, were taken to protect frontline services at a time when public sector finances are under pressure.
But critics say a further widening of the tax gap between Scotland and the rest of the UK would hurt the pockets of many Scots, harm economic growth and make the country a better place to live and work. They argue that it will lose its appeal.
