ScotGov 'dodging difficult questions' as income tax frozen

But Wednesday’s budget included a change to the amount at which the basic and intermediate rates - 20% and 21% - is paid.

The 3.5% increase next financial year means the basic rate will now be paid at between £15,398 and £27,491, while the intermediate rate will sit at between £27,492 and £43,662.

Tax divergence from the rest of the UK continues, according to the Chartered Institute of Taxation (CIOT), however it is eased by the decision to raise the basic and intermediate rate thresholds.

From April, the point at which Scots start paying more income tax than their counterparts in England, Wales and Northern Ireland will increase to £30,318.

Those with earnings below this figure will save up to £28.27 per year compared to those living elsewhere in the UK, the CIOT has analysed.

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However, think tank Future Economy Scotland said Scottish ministers appeared "unwilling" to take "necessary but difficult decisions" on tax.

Miriam Brett, co-director of the organisation, said: "Today's budget demanded ambitious action after what has been the most challenging year for Scotland's public finances since devolution."

She added: "Overall, while the budget has identified the right priorities, its ambition has been hampered by an unwillingness to take necessary but difficult decisions on tax.

"The pressing need to overhaul council tax has once again been ignored, while the Scottish Government has once again missed an opportunity to use its tax powers over aviation to reduce emissions.

"If the Scottish Government is serious about delivering its four missions, there is an urgent need for more fundamental tax reform to raise revenue and create a fairer tax system."

Roz Foyer, general secretary of the Scottish Trades Union Congress (STUC) also warned ministers had "dodged the big decisions on council tax, income and wealth taxes".

Meanwhile, Scottish Tory finance spokesman Craig Hoy argued the budget was "more of the same" due to the income tax decisions taken.

He accused the Finance Secretary of failing to listen to concerns about the "high tax regime" that he argued was detrimental to growth.

Finance Secretary Shona Robison. (Image: Andrew Milligan) "The SNP should have reversed their damaging tax rises and put Scotland on a path to greater growth," he said.

"Workers needed a game-changing tax cut, but the SNP gave them next to nothing. 

"Scots will still pay higher bills than their counterparts in the rest of the UK."

However, Ms Robison said her tax plans will provide greater certainty to workers. She said the decision to increase thresholds by 3.5% will see more Scots paying the lower rate of 19%.

She told MSPs: "I have decided to provide tax support for low and medium-income earners.

“The basic and intermediate rate thresholds will increase this year by 3.5%, effectively twice the rate of inflation.

“That means more of people’s money will be taxed at the starter and basic rates.

“It also means that the majority of taxpayers in Scotland will continue to pay less income tax than in the rest of the UK.

“This will remain true until at least the end of this Parliament while, as with the UK, thresholds for higher, advanced and top rates will be maintained at their current levels.”

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Ms Robison said decisions to increase tax among middle and high earners means that Scotland will see an additional £1.7 billion in its budget.

According to the Independent Institute for Fiscal Studies, Scotland’s top rate of income tax may have reduced revenues for the Government, although it admitted uncertainty over the exact figure.

Darwin Friend, head of research of the TaxPayers’ Alliance, said: “Taxpayers across Scotland will warmly welcome the lifting of tax thresholds, even if this won’t benefit all Scots.

“But with this budget also including a dazzling array of spending pledges, there will rightly be concern about the impact of the fiscal measures on the already fragile public finances.

“Scottish ministers need to ensure that this spending binge is accompanied with meaningful reform of public services.”

In last year’s budget, the Scottish Government announced a new tax band of between £75,000 and £125,140 with a marginal tax rate of 45%.

The top rate of tax was also raised by a penny to 48%, with concerns then raised about the level of tax divergence from the UK.