MSPs have agreed to make Scottish high earners pay more income tax than their English counterparts for the first time.
Using new powers devolved after the independence referendum, Holyrood passed the Scottish Rate Resolution (SRR) setting income tax rates and thresholds north of the border for 2017-18.
A deal between the minority SNP administration and the Scottish Greens saw the measure pass 61-55, with the Greens abstaining and the Tories, Labour and LibDems opposed.
Read more: Derek Mackay bows to rates hike fears with £45m package
A prerequisite for Thursday’s final vote on the Budget Bill, the SRR means the basic 20p and additional 50p rates and thresholds remain the same throughout the UK.
However in Scotland the 40p rate threshold will stay £43,000, while in the rest of the UK the Tory government will increase it to £45,000.
It means around one in ten taxpayers in Scotland will pay up to £400 more than in England.
As part of the SNP-Green deal, councils will get an extra £160m next year, although they still face cuts of £170m.
Finance Secretary Derek Mackay said the vote had been “historic”, the first time rates and bands of income tax had been set by Parliament in line with Scotland’s needs and priorities.
Read more: Derek Mackay bows to rates hike fears with £45m package
He said: “ This represents the best deal on tax and public services anywhere in the UK – increasing investment in the NHS and helping protect free prescriptions, free personal care for the elderly, mitigation of the bedroom tax and free higher education.”
Labour MSP Alex Rowley said: “This was a vote that will enter the history books, and nobody will ever forget how the SNP and Greens voted to reject a fairer tax system for Scotland.
“The SNP chose not to invest – the SNP chose to continue Tory austerity.”
Moira Kelly, chair of the Chartered Institute of Taxation in Scotland, said the cross-border divergence in tax meant a more complicated system.
She said: “There will be some Scottish taxpayers who will pay the higher Scottish income tax rate on their earned income, but who will also have to consider UK rates and thresholds for working out their liability on savings income such as bank interest or share dividends.
Read more: Derek Mackay bows to rates hike fears with £45m package
“Additionally, taxpayers across the rest of the UK earning between £43,000 and £45,000 will continue to benefit from the Marriage Allowance on account of being basic rate taxpayers while those earning the same amount in Scotland would forfeit this.
“Tax devolution is complicated and this year’s decisions represent the first of what could be many divergences in the years to come.”
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