Budget tax changes will see 372,000 Scots pay more than rest of UK

Derek Mackay announced the threshold for the higher 40p rate of income tax is being frozen at £43,000

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Changes in the Scottish Budget could see 372,000 taxpayers facing higher charges than they would south of the border, a finance expert said.

As part of his tax and spending plans for 2017-18, Finance Secretary Derek Mackay announced the threshold for the higher 40p rate of income tax is being frozen at £43,000.

In contrast, the UK Government is increasing the threshold to £45,000 - a move which SNP ministers have branded a tax cut for higher earners.

John Preshaw, tax director with the professional services firm PwC, said the change would impact approximately 372,000 people in Scotland.

He said: "That's around 10% of the workforce and will see them pay £400 a year more than counterparts in other parts of the UK.

"This is an increase on what had previously been considered. Originally, the Scottish Government planned to increase the higher rate threshold in line with inflation and that would have cost each taxpayer £314 per annum.

"This means that today's announcement alone has an impact of £86 per annum per taxpayer compared to the original plan."

While he said there would "clearly be an impact for individuals in real terms", he added that he did not expect the policy to have any "short-term impact on decision making for people who may already be planning to relocate to Scotland or for Scottish businesses looking to attract staff".

The change in tax policy from Mr Mackay will help the Scottish Government raise an extra £160 million for councils.

The additional funding was welcomed by David O'Neill, president of the local government body Cosla.

He said: "What we have clearly seen today is that some MSPs in the Parliament both recognise and indeed value the vital public services that councils provide to communities and this has resulted in the Government's concession today.

"Whilst I absolutely welcome the reduction in the cut, the simple truth is that there remains nearly £200 million of a cut to local public services and this is still not a good result, better but not good.

"That said, what I can promise is, as always, my colleagues in local government and I will do our very best to mitigate the impact of these cuts on communities."

Anti-poverty campaigners said the changes in the Budget would "need to go a lot further" to tackle the problem in a "meaningful way".

Peter Kelly, director of the Poverty Alliance, added: "The Poverty Alliance will continue to call for more progressive taxation, and for the topping up of child benefit and means tested benefits for single working aged people."

But small businesses said they would have preferred taxes in Scotland to remain in line with those south of the border.

Colin Borland, head of devolved nations for the Federation of Small Businesses, said: "Our instinct is always to simplify the tax system wherever we can, not complicate it. And we haven't properly explored the full practical consequences of Scottish divergence from the rest of the UK. So we would have preferred to keep both rates and thresholds aligned.

"At a time when weak consumer demand and the sluggish state of the domestic economy are dominating small business owners' worries, it would have made sense to put some money into their customers' pockets."

Police Scotland Chief Constable Phil Gormley welcomed extra funding for the service, which he said would support its "ongoing transformation".

He added: "Police Scotland has been working with the Scottish Police Authority to develop a 100year strategy. This will deliver a sustainable policing model that provides the protection Scotland needs and enables us to get to a position where the budget is in balance.

"This additional money will enable us to start to make the strategic investment necessary to build that service, improve productivity and create the capabilities we know we will need to meet existing and future demand."