Who would design an income tax system like Scotland’s from scratch? South of the border, there are three bands and a personal allowance. It’s not complicated.

The tax-free personal allowance is currently £12,570. If you earn more, those wages are taxed at 20% up to £50,720. Then it’s 40% up to £125,140, and 45% above that.

Now consider Scotland, where income tax has been largely devolved since April 2017, where a five-band system was introduced in 2018/19, and where ministers have repeatedly frozen thresholds and tweaked the rates. 

As it’s set UK-wide by the Chancellor, the tax-free allowance again covers earnings up to £12,570, but instead of one band covering other wages up to £50K, there are four. 

On earnings between £12,571 and £14,732 the tax rate is 19% (starter), between £14,733 and £25,688 it’s 20% (basic), between £25,689 and £43,662 it’s 21% (intermediate), and between £43,663 and £125,140 it’s 42% (higher). There’s then a top rate of 47% above that.

If that sounds complicated, don’t worry. You needn’t remember it. It’s about to get worse. 

Once Holyrood passes the Scottish budget for 2024/25 later this month, Scottish taxpayers can look forward to an even more tangled six-band system. 

As well as changes to the lower bands, the ‘higher’ band of 42% will narrow and apply to earnings between £43,663 and £75,000, with a new ‘advanced’ band of 45% straddling £75,000 to £125,140 and an increased top rate of 48%.  

It’s not just income tax. For more than a quarter of a century, the formula for council tax was the same across the UK, despite the valuation bands differing.

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The bill for a Band A house was two-thirds of a bill for a Band D, which in turn was half the bill of a Band H. Or if you prefer ratios, if Band D is 1, A was 6/9, B 7/9, C 8/9, E 11/9, 13/19, G 15/9, and H 18/9. It’s still like that in England. Wales added a Band I (ratio 21/9) in 2005.

In Scotland the top four bands underwent structural increases in 2017, so the ratio of Band E to D became 473/360, F 585/360, G 705/360 and H 882/360. Catchy, eh?

The Scottish Government planned to repeat the move - making the new E, F, G and H ratios 508/360, 658/360, 828/360 and 1080/360 - until Humza Yousaf scrapped it as part of his plan to freeze council tax. 

It shouldn’t be a surprise. As we saw at the UK Covid Inquiry, the Government loves to tinker - with social distancing rules, for instance. Not necessarily make them better, but make them different, underlining the devolved powers at play and ministers’ choices. 

The aim of the tax tinkering is a more progressive system that sees the rich pay most. It has, broadly, done that. But some changes are dumb posturing. The new advanced income tax band was supposed to raise £147million, and hiking the top rate to 48p another £53m.

However the Scottish Fiscal Commission calculates 59% will be lost as people take steps to avoid bigger bills, and the changes will raise £74m and £8m respectively. It’s a difference (that fuels the unhelpful ‘high tax Scotland’ trope) without a commensurate advantage.

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It also offends the Government’s own tax policy guidance, which stresses efficiency (losing £45m of £53m is hardly that) and having taxes that are readily understood. The Chartered Institute of Taxation warns the new six-band system will make it “more difficult for Scottish taxpayers to easily understand their tax affairs”.

Meanwhile, the incessant tinkering with council tax since 2007 - freeze, cap, unfreeze and freeze again - this week saw a town hall revolt, as some council leaders said they would rather put the levy up by a useful amount than endure cuts with an under-funded freeze. 

This wasted energy is partly a result of Holyrood having so few taxes to influence. If it had more powers, any changes would doubtless be spread more evenly. But as things are, the few hapless taxes within reach of SNP ministers are being tinkered to death. The result is not a slick progressive exemplar, but a lumbering misshapen mutant. 

No one would design a tax system like Scotland’s from scratch. And regrettably no one did.