Our income tax plans explained

By , 22/03/16

Today Nicola Sturgeon outlined our plans for new income tax powers which will come to the Scottish Parliament from 2017-18.

The proposals mean that income tax rates will be frozen, additional support will be provided for those on the lowest incomes, while raising more than £1 billion for Scotland’s public services.

Here’s what you need to know about our plans.

We will freeze the rates across all bands.

Under our proposals no taxpayer will see their bill increase, with all income tax rates frozen.

The basic rate of tax will not be increased at any point in the next Parliament if an SNP government is re-elected. That means those on lower incomes - who Labour and the LIberal Democrats would hit with a tax hike to bankroll Tory austerity - will be protected from any increases.

We’ll use our new powers to protect those on low incomes from cost of living increases.

By 2020, based on current plans, the Personal Allowance (the level of income at which income tax starts to be paid) is set to increase to £12,500 across the UK. To protect those on the lowest incomes from cost of living increases, by the end of the next Parliament we will increase the Personal Allowance to £12,750.

Blocking Osborne’s tax giveaway for higher earners will raise more than £1 billion for Scotland’s public services.

Instead of offering a large tax cut to those on higher incomes, and putting public services at risk, our plans will ensure that the higher rate threshold (the income level at which the 40p rate is payable) rises only by inflation next year. That means that next year the threshold for higher rate taxpayers will increase from £43,000 to £43,387.

By taking a different approach to the Tories in Westminster, around £1.2 billion can be raised in the period up to 2021-22. That’s revenue that can be invested in our schools and hospitals, and to support the additional benefits available for taxpayers in Scotland like free personal care, free education and free prescriptions.

We back the 50p top rate of tax across the UK, but to do it in Scotland alone could put millions in revenues at risk.

If just seven per cent of top rate taxpayers change their tax arrangements the Scottish Government could lose £30 million in revenues in a single year, putting the funding of our public services at risk. The Scottish Government has published a policy analysis of the impact of making changes to the additional rate in Scotland only, which you can read here.

The additional rate will not increase in 2017/18, but analysis will be updated each year to inform decisions in future budgets.

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