MSPs back new Scottish income tax rates for higher earners

MSPs have voted to back the Scottish Government’s plans to create a new tax bracket for higher earners.

The Scottish income tax rate resolution for the next financial year was passed by 62 votes to 54 on Thursday.

Under the plans, a new rate will be implemented for those earning between £75,000 and £125,140, following an announcement from deputy first minister Shona Robison in December.

The 45p-in-the-pound rate, she said, would sit alongside a 1% increase to the highest tax band, which will take it to 48% – with both changes impacting the top 5% of Scottish taxpayers.

The basic and intermediate bands will see the rates at which they kick in rise by the rate of inflation, while the highest rates will remain the same.

The Scottish Fiscal Commission (SFC) forecasts the tax changes will bring in £1.5bn in revenue funding next year alone, although its chair said “tough decisions” are still likely to be necessary in individual Government departments.

Speaking in a debate on the proposals, public finance minister Tom Arthur said the setting of the tax rates was “set against a backdrop of one of the most challenging periods for the public finances in the devolution era”.

He added that “difficult but necessary decisions” had to be taken in the budget to protect public services, adding that the tax proposals will mean more than half of Scots will pay less tax than the rest of the UK.

The proposals, he said, will “raise vital revenue to invest in public services while protecting the majority of taxpayers”.

Scottish Tory finance spokeswoman Liz Smith, however, said businesses were “extremely worried” about the Government’s budget.

While Scottish Labour finance spokesman Michael Marra said those earning more than £28,850 – who are paying more tax than they would in the rest of the UK – “do not have broad shoulders and they are not rich – far from it”.

The stage three debate on the Scottish Government’s budget for the next year will take place next week.