EXPERTS have warned that more than 200,000 extra Scots could be forced into the highest tax band by 2028 – using “baseline assumptions” that SNP ministers will freeze the higher-rate threshold.
The Scottish Fiscal Commission (SFC) has forecast that 232,000 additional taxpayers could fall into the higher band by the end of the 2027/28 financial year.
It said: "We estimate that the proportion of higher rate taxpayers will increase from 11.8 per cent of total tax payers in 2022-23, to 17% by 2027-28.
"This would mean around 232,000 more tax-payers in 2027-28 than if we maintained an assumption of inflation uprating."
The organisation has made the forecast based on discussions with Scottish Government officials, who were “content” with the assumption that the higher rate tax threshold, currently £43,633, as well as the basic rate, being frozen at 20 per cent.
David Stone, the SFC’s head of economy and tax at the SFC, said: “Now we’re in a situation where nominal earnings are rising, around 4% per year, but inflation is a lot higher than that.
"But even still, nominal earnings and a frozen higher rate threshold will mean a lot of people moving into that higher rate band over the next few years and starting to pay 41 per cent tax.”
The Scottish Government is yet to set its tax policy for the coming years.
When asked about the possibility of freezing tax bands, a spokesman for the First Minister was unable to say if it was being considered.
SFC chair, Susan Rice, warned that Scotland is facing a “very challenging economic outlook".
Turning to inflation, she added that the commission “expect it to peak in the final quarter of 2022 as the October energy price cap comes in”.
She added: “Rising inflation has provided a moderate boost to tax revenues in cash terms. But with the Government facing pressure for higher public sector wages and reduced purchasing power, the fiscal outlook remains challenging.
“Although the Scottish Government agreed with this revised baseline assumption, they haven’t yet set their income tax policies for next year or later.”
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