High-earning Scots face paying nearly £8,000 a year more in tax than their counterparts south of the border under plans by Boris Johnson to make a massive cut for the wealthiest in the rest of the UK.
The Tory leadership frontrunner came under sustained attack over a £9.6bn giveaway for 3m workers that could widen the tax gap between Scotland and England.
His plan to raise the threshold at which people pay the higher rate of income tax to £80,000 would be partly paid for by changing employee national insurance contributions (NICs).
But while income tax is devolved, NICs are reserved to Westminster, limiting Holyrood’s room for manoeuvre and creating a 53 per cent marginal tax rate for nearly 400,000 Scots.
Mr Johnson’s plan - if not followed in Scotland - would mean Scots earning around £80,000 would pay nearly £8000 more than equivalent workers south of the border, according to the Institute of Taxation.
Professionals affected at this level would include hospital consultants, police superintendents and the most senior head teachers. Workers on more than £60,000 would pay as much as £3644 more than they would in the rest of the UK for the same job.
The highest-paid train drivers, air traffic controllers and some police chief inspectors would be affected. Edinburgh Labour MP Ian Murray said Mr Johnson was “playing fast and loose with the Union” and urged Scottish Tory leader Ruth Davidson to distance herself from the plan.
Mr Johnson’s idea was also condemned by others bidding to become Prime Minister. Environment Secretary Michael Gove said he would never use the tax and benefit system to give tax cuts to the already wealthy, adding: “The poor must come first.”
The Institute for Fiscal Studies said the biggest beneficiaries of the plan would be wealthy pensioners and those living off investments, as they do not pay NICs.
This group includes many of the elderly Tory party members the former Foreign Secretary is trying to woo in his bid to replace Theresa May.
Mr Johnson proposed raising the threshold for the higher rate of income tax, which is £43,430 in Scotland, from £50,000 to £80,000 in the rest of the UK. He said the policy would be partially paid for by employees paying NICs at 12 per cent up to the new threshold, and partly by money earmarked for Brexit contingencies.
However, because Holyrood only has control over income tax, and NICs are reserved, it could create a huge difference in total tax rates across the border.
In England and Wales, people earning between £50,000 and £80,000 would pay 20% income tax and 12% NICs, a marginal rate of 32%.
But in Scotland, if Holyrood left the current tax rates unchanged, people earning between £43,430 and £80,000 would pay 41% income tax and 12% NICs - a marginal rate of 53%.
Although this 53% marginal rate is already paid by a small group of Scots within a narrow salary range, Mr Johnson’s plan would extend it to a far greater group over a far wider range.
It would see Scots earning up to £80,000 paying an effective marginal rate of 53% on up to £36,570 of their salary, handing more than half their earnings to the state.
If the Scottish Parliament copied Mr Johnson’s plan and raised the higher rate threshold to £80,000, it would harmonise NIC levels UK-wide, and avoid any such gap.
However, Nicola Sturgeon ruled out copying Chancellor Philip Hammond’s lift in the higher rate threshold to £50,000 this April on the basis it was a tax break for the already well-off.
- READ MORE: Boris Johnson under fire for proposing £10bn tax cut for Middle England paid for in part by Scotland
Alexander Garden, of the Chartered Institute of Taxation, said: “If enacted, the proposals put forward by Boris Johnson are likely to throw into sharp focus the growing tax divide between Scotland and the rest of the UK.
“Taxpayers in Scotland who pay income tax at the rates and bands decided by the Scottish Parliament for earned income would not see any of the benefits of the proposal to increase the higher rate threshold from £50,000 to £80,000, but they would be impacted by changes to NICs.
“Under the Johnson tax plans, some Scottish taxpayers with earned income may end up paying significantly more than their counterparts elsewhere in the UK.”
Mr Murray said: “Boris Johnson is a greater threat to the Union than the SNP. “When so many people across the UK are suffering in poverty, it is sickening that his priority is massive tax cuts for the wealthiest in society.
“The fact that hard-pressed workers in Scotland would pay towards the tax cuts is a double blow, and will create deep divisions within the Union.
“The Tories are playing fast and loose with the Union and can’t be trusted to protect Scotland’s place in the UK.
“Ruth Davidson must urgently distance herself from this insulting proposal and explain to Scots what she is planning to do about it when he becomes Prime Minister.”
A spokesman for the Fraser of Allander Institute at the University of Strathclyde said of Mr Johnson’s plan: “Now that income tax is devolved, this proposed tax cut would not apply in Scotland. Such a substantial tax cut across the UK may lead to pressure on the Scottish government to at least partially follow suit, given the heightened tax policy differentials and incentives for behavioural effects.”
A spokesman for Mr Johnson said: “It’s up to the SNP whether they follow Boris’s leadership or continue with their policy of holding Scotland back as the highest-tax part of the UK. We urge them to follow Boris’s lead.”
A spokesman for the Scottish Conservatives said: “All proposed tax changes have to be conscious of the devolution settlement and the impact on devolved finances. If this proposal is introduced, we would expect the implications for Scotland to be fully taken into consideration."
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereLast Updated:
Report this comment Cancel