Scottish higher tax rate threshold

[Srit]

Her name changed for this, just pondering the facts rather than the politics.

One of the measure apparently being considered by new WM government is to raise the threshold at which higher income tax applies from just over 50k to 80k, in Scotland that threshold is 43.6k plus of course the higher rate of tax.

Anyone know what powers the SG have regarding the threshold? I believe there's a limit to how much the rate can be changed, but can't find anything out about the thresholds.

Is the threshold we pay not determined by SG? So surely they could raise it if they wanted to to align better? The wider the gap in take home pay the less attractive Scotland is for investors or employees.

My question is are they compelled to keep the threshold pegged somewhat (like actual tax rate) or could they use this to widen the difference? Both have ramifications- budget vs competitiveness?

All very theoretical anyway as we've no idea what measures are coming!

In Scotland, higher rate tax paying (41%) starts on anything you earn over £43,663. In England higher rate tax paying (40%) starts when you earn £50,271, so we pay loads more tax already than England to pay for her policies.

I haven't found anything yet which compels them to peg to the UK. So if - big if - Truss massively increases the threshold then I don't think we'd be compelled to follow.

Creates a potential problem if we don't though as that would be a huge difference for some - and might well push people who have a choice about where to base themselves to move south.

I believe the block grant is reduced by the amount scotland would be expected to take in income tax if it had the same tax levels and tax growth as rUK. So in theory if we had higher tax we should do well
But - and I'd need to dig out the figures:
A) we already don't make as much "extra" as we theoretically should, by a fair chunk.
B) how many higher rate taxpayers would have to head south before that boost was lost?
C) we might see an issue where some jobs start to have to pay a "Scotland weighting" to balance it out and attract people. Would the govt be prepared to do that in the public sector? I'd be surprised, but if not I would foresee a recruitment crisis in areas like medicine.

I can't help feeling we are too close and too intertwined for such a big difference not to cause issues 😕

I think we’d be £350 a month better off living in England. I don’t mind paying more for the child benefit, but I really really object to the gimmicks:

baby boxes
free prescriptions
free dentistry
overseas embassies
free tuition (middle class benefit, caps numbers of students that can apply)
indyref spending - a lost cause!
school iPads etc
non existent bikes

if she wants to increase taxes she also has to cut the nonsense.

I had missed that completely and looked it up to check. I thought the only difference was the 20/21 and 40/41% levels. and still health and education are a nightmare here and don't get me started on the potholes in Edinburgh

We'd be several thousand better off in England currently, I'm permanently home based, DH works for a National organisation and could easily transfer to another location.

Food for thought...

Having moved north recently - the NHS round these parts is notably better

I don't come on MN so much anymore because of the contempt the mods show for feminists but I thought I'd dip in this evening, and happened upon this thread and see this. I have been a big fan of you (your posts) for about 10 years StatisticallyChallenged! Women like you are why I used to love mumsnet. So clear and rational.

Anyway, back on topic! It would cause a very big gulf, but I think it would primarily affect trying to recruit people from RUK into Scottish jobs, but I can't imagine it would be enough to make people already here up sticks and move.

How can access to free dental care and prescriptions be gimmicks? These are life changing for some people. Personally I'm glad we don't say to people 'oh sorry you're too poor to get your teeth looked at or that medicine you need.'

Personally I am about £50 a month better off living in Scotland and I think that's bloody good value considering the services we have access too.

School dinners, prescriptions, dental treatment, university tuition...I have no idea how I'd afford these things and very grateful they're provided for us. I'd be happy to pay a bit more tax to cover it.

They may well be gimmicks.

We also have free dental care in Wales in theory, but it's largely a gimmick because you can only access it if you can get an NHS dentist, which you can't.

We also have free prescriptions. All this means is people make GP appointments for prescriptions for paracetamol, rather than just buying it over the counter, which decreases GP availability. Be careful what you wish for.....

But prescriptions etc are free to those in need in the rest of the UK. They’re not paid for and this ought to be copied in Scotland. I go to the dentist, I get a service, I want to pay for the service I receive rather than that service being paid for somewhere down the line by my taxes that have been swallowed up by a government black hole.

I have a dentist and have never had an issue seeing a GP. Certainly never heard of anyone going to GP for paracetamol, if you cant afford it you can get it for free over the counter on minor ailments not why you would bother a GP for it. I'm quite content with the situation and like the fact that SG implements policies that look after our poorest and most vulnerable.

In my view progressive taxation is a good thing and what's been proposed south of the border is a backwards step. Driven by greed and reeks of 'looking after our own' when it's the lowest earners that need most help against the spiralling cost of living.

But nothing is changing down south. The level at which you are deemed a high earner rises in rUK to reflect inflation. Wages rise so our definition of who a high earner ought to rise, that’s what rUK is doing. By not changing the level at which you start paying high rate tax, Scotland is reducing in real terms each year what it seems to be high wages and more and more people are being pulled into paying high taxes. You can’t keep increasing the taxes of high earners if you want the economy to function - people spending money in cafes and restaurants, people holidaying etc.

In Scandinavian countries the basic rate tax averages 30%. So where we pay 21% they pay 30%. If the SNP want Scandinavian public services, everyone has to pay a LOT more, not just those ‘wealthy’ who earn more than £43k.

I agree - and my children not being saddled with a vast debt for their education is not a ‘gimmick’ as far as I am concerned. Remember, when Westminster abolished the bursary for nurses, the Scottish Government increased it. I am happy to pay more tax for health and education.

<blush> thank you

It's a tricky one; a few years ago I would have thought not but WFH changes a lot. I could do my job from anywhere in the UK really as I've only been in the office a handful of times. Quite a few of my colleagues (including me) have moved out of the city and are already a train ride out - hopping the border isn't actually a huge leap for many in Edinburgh finance, for example. I think it would be schools and family links that would be more likely to keep people, but I already know of a couple of families considering the move.

My sector has a strong London base and I regularly get recruiters calling me about roles based there. My home commitments stop me going but I can't help thinking the tax situation might tip the balance for some of my colleagues who don't have the same ties. Many have already moved for work - I could see them doing it again.

Given many sectors have huge recruitment issues just now it could bite hard.

But will you still be happy if your child can’t get into a course with their grades yet a teen with equivalent grades from rUK can get in? Because that’s exactly what the Scottish system does. It gives free tuition fees to a limited number of students every year, and only that number of students get in. Student numbers in Scotland are capped.

I thought I'd read that the increase in tax rates in Scotland had actually lead to a drop in tax take. For example. More higher rate people were putting cash into pensions.

It’s not that as much as the Barnett formula is designed to redistribute tax take throughout the UK. The tax take in the City of London and SE London is much higher than elsewhere in the UK so we in the regions all get some extra cash as part of spreading out the wealth generated by one of the worlds biggest financial centres. By raising income tax in Scotland (by wringing more out of the squeezed middle) Scotland takes more tax itself so gets less redistribution from the rest of the UK.

For free tuition absolutely we are prepared to take that 'risk' because if we have to pay for it my child won't be able to go to university.

My children will also attend a secondary school that comes under widening access criteria so they are likely to offered a place with minimum entry grades (rather than the standard). I can't see anything but as positive for my family, our peers and those who are worse off and more vulnerable than ourselves.

Scotland increasing our tax take shouldn't actually impact the block grant, I don't think. I could be wrong in how I'm reading it though. I think the way it works has been:

• power for <whatever tax> is devolved
• at the point it's devolved then the block grant is reduced by the amount of the tax raised by the UK in Scotland in the year prior (probably with some adjustments)
• the value to be deducted in future years is then indexed according to how that tax take has changed in the rest of the UK

So in theory if rUKs income tax take reduces and Scotland's doesn't then Scotland would be better off as the reduction in the block grant would be smaller as it would be based on how the rUK income tax changes. And vice versa.

Over a 3 year period the different tax rates/thresholds meant Scots paid about £900m more in tax than they would have in rUK. But the benefit to the Scottish budget was only about 20% of that (£180m) because various differences (like wage growth) between us and rUK meant that rUK income tax take grew faster than ours which ate up the difference.

So we're getting less redistribution but that's because we should be making it up ourselves. But we're not seeing as much benefit as we should be.

So because you can afford them, or dont personally need them, they are gimmicks?

I can remember my mum choosing to put up with menopause symptoms because she couldnt prioritise the regular 2 x prescription charges the HRT would take out in her household budget.

Me and my siblings would not have had further education without tuition fees. Some of ds's friends would probably not have the opportunity to go to uni (on the free bus gimmick you probably disagree with too) next week either.

I dont need the "gimmicks" now, but happy to live in a country where taxes are paid to help those that do.

This might be an age difference - I grew up in a poor (council estate on benefits, single parent) house, and I am pretty sure my mum didn't pay prescription charges. This would have been pre scottish government policy, I'm pretty sure. Perhaps they were free to those on benefits but not working people with low incomes. Free prescriptions makes sense, and I think the cost isn't that high due to the simpler admin although it's ages since I looked at numbers.

I also went to uni from an impoverished background, just as there was lots of upheavel in the Scottish system. I was piss poor; homeless at 17 which meant that I ended with my own flat and all the costs that went with it, and no family support at all. I personally wasn't bothered by student loans and I would have taken loans to fund tuition fees too if I'd had to - for me the challenge was that bursaries/loans didn't cover my living costs so I had no choice but to work (and quite a lot - I had a FT job) to manage. I applied and got in to Oxford, but I couldn't afford to go, not because of the tuition fees (which would have been covered for me under the system at the time) but because of the living costs which even then far exceeded the available support and they didn't allow students to work.

I would prefer, I think, to see more targetted support for poorer young people rather than blanket free fees. From what I can see student accomodation has become even more expensive so if you are a young person who doesn't have the option to live at home through uni and you don't have parential financial support you are at a massive disadvantage. You will have to work more than your better off peers which gives you less time to study. You're less likely to be able to take advantage of extra curriculurs, and things like summer internships (often unpaid) which can be massive CV builders just aren't possible as you're working.

I'd rather see the budget focused on those who need it the most which I think that would be more beneficial for poorer students, rather than the current free for all system which results in limited places for Scottish students and is a huge benefit to the better off.

What's stated here isn't true.