Holyrood agrees income tax rates on eve of Budget vote

MSPs have voted to back the Scottish Government’s income tax plans 24 hours before its budget is due to go before parliament.

The Scottish Government proposed freezing the two highest tax brackets for 2020-21 while the threshold for the basic and intermediate rate of tax will rise by 0.2% and 0.9% respectively.

According to the Scottish Parliament Information Centre (Spice), the increases in some thresholds will have the effect of bringing the amount paid in the bottom three brackets up by inflation.

Analysis by the Scottish Fiscal Commission found the rates will bring in a total of £12bn in revenue to the public purse next year.

MSPs voted to pass the resolution by 58 votes to 50 with five abstentions.

The passage of the plans has now cleared a path for the Scottish budget to be approved on Thursday.

Due to parliamentary rules, the rates resolution must be passed before the final stage of the budget can be voted on.

Earnings between the £12,500 personal allowance and £14,585 will taxed at 19%, between £14,586 and £25,158 will be taxed at 20% and a 21% rate will be put on earnings between £25,159 and £43,430.

Income between £43,430 and £150,000 will be taxed at the higher rate of 41%, while earnings over £150,000 will be charged the top rate of 46%.

Public finance minister Ben Macpherson told the chamber on Wednesday: “This is our opportunity together to use the powers of this parliament to continue a progressive approach to income tax.

“Our fairer and more progressive tax policy means that 56% of Scottish taxpayers will pay less tax than they would if they lived elsewhere in the UK in 2020-21.

“We are proposing to raise the starter and intermediate rate bands by inflation and freeze the higher and top rate thresholds.

“The decision to freeze the higher rate threshold in 2020-21 is forecast to raise £51m next year.”

Scottish Conservative finance spokesman Donald Cameron said his party could not support the proposals.

He said: “I remain disappointed that, despite the talks my party had with the cabinet secretary for finance, our request that the government guarantee there be no further divergence should the UK Government make any changes next week was ignored.

“While many hard-working people across Scotland will no doubt be relieved that the tax-hiking, levy-raising tendencies of this government have been silenced for this year at least, the freezing of the higher and top rate thresholds will mean that… more people will be sucked into paying more tax.”

Greens co-leader Patrick Harvie said Scotland’s move from a four-band system to one with five tax bands was the “single biggest element achieving a progressive effect” but added: “I don’t think that’s enough to alleviate poverty and inequality.

“I once again encourage all political parties, including the Scottish Government, to show greater imagination, creativity and boldness in the council tax talks than we’ve seen today.”

Scottish Labour’s finance spokeswoman Rhoda Grant said: “We now have an SNP government that demands independence but is much too timid to tax the rich.”