Tax row over £500 'thank you' for NHS and social care staff

A row has broken out over who is responsible for making a one-off £500 payment for NHS and social care staff tax-free.

First Minister Nicola Sturgeon announced the bonus during her address to the virtual SNP conference on Monday, but challenged Prime Minister Boris Johnson to make it tax-free.

“Please allow our health and care heroes to keep every penny of Scotland’s thank you to them,” she said. “Do not take any of it away in tax.”

However, the UK Government said it was the Scottish Government’s responsibility to make sure workers were able to pocket the full £500.

And, on Tuesday morning, the Fraser of Allander Institute, an independent economic research unit, said exempting bonuses from tax was “not widely regarded as a good use of tax policy”, adding “the solution is to pay a higher gross bonus”.

The Scottish Conservatives have argued increasing the payment to £625 would give the workers the full £500 after tax and accused the SNP of “stoking up division”.

Scottish Tory leader Douglas Ross said: “The SNP have all the funding and powers they need to top up this payment today. Any extra income tax would go to the Scottish, not the UK Government, so if they increase it, no-one misses out.

“Why is it that the SNP feel the need to take a £500 NHS ‘thank you’ payment and stoke up division with such a clearly political move, all to provoke a fight with the UK Government?”

The pro-rata payment will be funded from the Scottish Government’s Covid-19 support package and applies to everyone employed since March 17.

The scheme will cost around £180m and will see more than 300,000 people benefit in some way, from nurses and doctors to care home and hospice staff.

Scottish Government finance secretary Kate Forbes said grossing up ‘”utterly misses the point”, adding on social media: “It isn’t an exemption and will still be taxed. Why? Because we can’t set tax exemptions!

“The more we gross up, the more health and social care workers have to pay in tax. We’re asking for a tax exemption.”