22 March 2016

The First Minister visited the Royal Hospital for Children in Glasgow to outline the Scottish Government’s income tax proposals.

From 2017/18, the Scotland Bill will give the Scottish Parliament powers over all revenue raised from non-savings non-dividend income tax paid by Scottish taxpayers.

The Scottish Parliament will set the rates and band thresholds – excluding the personal allowance – for the first time.

The First Minister said the UK Government’s tax cuts brought about by substantial increases to the higher rate threshold will not be passed on. Instead, the higher rate threshold will be frozen in real terms and increased only in line with CPI inflation in 2017/18 and by no more than inflation until 2021/22.

The exact level of the higher rate threshold will be set out each year by the Scottish Government at the budget.

The Scottish Government’s proposals are expected to generate cumulative additional revenue of more than £1 billion by 2021/22.

This balanced approach will be fair to higher rate taxpayers while also generating additional revenue to be invested in Scotland’s public services such as the NHS.  You can read details of the tax proposals here.

The First Minister said:

“We have balanced the need to invest in and support our public services with a recognition that many households are still facing difficult economic challenges, and with the need to grow the Scottish economy.

“We will not allow our public services to pay the price of an inflation busting tax decrease for the highest earning 10 per cent of the population. We think that is the wrong choice.

“We will freeze the basic rate of tax for the duration of the next parliament. We do not believe it is right that those on low incomes are asked to pay for austerity. That does not tackle austerity, it simply shifts the burden to those who can least afford it. No taxpayer will see their bill increase as a result of these Scottish Government proposals.

In 2017/18, instead of offering a large tax cut we will ensure the higher rate threshold rises only by inflation.

“That means next year the threshold for higher rate taxpayers will go from £43,000 to £43,387.

“That increase will prevent higher rate taxpayers from receiving a real terms cut in their tax bills, but nor will they see their bills increase.

“By adopting a different path to the UK Government we could generate more than £1 billion of additional revenues, enabling us to protect the public services we all rely on. We believe that this proposal is reasonable, it is balanced and it is fair.”