Middle-income earners hit by new Scottish tax rate

The Scottish government is planning to introduce a new "intermediate" income tax rate, and pushing up existing higher and top rates, it announced during its Budget today.

A new rate of 21 per cent is being introduced on annual incomes of between £24,001 and £44,273, while the higher rate, on incomes of up to £150,000, will rise to 41 per cent and the top rate will climb to 46 per cent.

A new starter rate is also being introduced, of 19 per cent on incomes between £11,800 and £13,850. The basic rate was frozen at 20 per cent.

Workers who earn between £33,001 and £44,273 – around 30 per cent of the nation – will pay more than £100 in annual tax under the new regime.

Scottish finance minister Derek Mackay told MSPs: “Having carefully considered contributions from the public, civic society and the business community, I have decided to reform Scotland’s income tax system.

“Using the limited powers available to us, the decisions I have reached will make our income tax system fairer.

The SNP justified the move, saying under the current devolved settlement, "income tax is the only major tax power that the Scottish Government has at its disposal".

"These proposals will also mean that 55 per cent of taxpayers – those earning up to £26,000 – will pay marginally less income tax than if they lived elsewhere in the UK. For the majority, Scotland will be the lowest taxed part of the UK."

In a fact sheet to accompany the proposals, the government said: "Continued cuts to our budget by the UK Government mean that in 2019-20 our fiscal budget allocation for day to day spending will be £200m lower in real terms than it is this year."

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