SCOTLAND'S left wing parties face a "devil's choice" between increasing tax for low and middle earners or allowing the gap between rich and poor to widen, a think tank has warned.

A new analysis from the IPPR shows the wealthiest 10 per cent of households will be £600 per year better off, on average, if George Osborne's promised tax cuts are passed on to Scots.

Increasing income tax in Scotland would wipe out the gain, the study shows, but middle and some lower earners would also have to take a hit.

The think tank studied the impact of the main Holyrood parties' tax plans in the light of the Conservatives' own pledges.

Mr Osborne, the Chancellor, is planning to increase the personal allowance, the point at which workers start paying income tax, to £12,500.

He has also pledged to push the higher rate threshold, above which earnings are taxed at 40p, from £43,000 to £50,000.

Under a "do nothing" scenario - if MSPs refused to depart from UK tax rates - better off households would reap the benefit, with the richest 10 per cent of households enjoying a £600 boost to their disposable income.

A third of households at the bottom of the income scale would not benefit at all, the analysis shows.

The IPPR says raising income tax by 1p in Scotland, as proposed by Scottish Labour and the Scottish Lib Dems, would cost the richest 10 per cent of households more than £1000 on average.

However, less well off families would also see tax bills rise because, under Holyrood's existing powers, the basic, higher and additional rates would all rise together.

A straight 1p rise would cost some people in the bottom third of the income scale £20 per year.

Labour's proposed £100 rebate for all those earning under £20,000 would shield the poorest third of Scots, but the report concludes the payment "needs further clarity".

Mr Osborne's tax changes are due to take effect at some point before 2020.

In his budget for the financial year starting in April, Finance Secretary John Swinney set a Scottish rate of income tax that matched existing UK rates.

He has rejected Labour's and the Lib Dems' call to increase the rate, saying it would place an unfair burden on lower and middle earners.

At present, Holyrood controls about half of the income tax raised in Scotland.

But under the limited powers available, it cannot raise the different rates independently or vary the thresholds.

Under the new Scotland Bill, the parliament is due to gain almost full control over income tax, including the power to vary rates and bands.

However, talks on the financial arrangements required by the new powers have stalled, with the Scottish and UK governments unable to agree a mechanism for reducing Holyrood's annual grant from Westminster after it gains control of income tax.

Russell Gunson, the director of IPPR Scotland - who has written a blog on the issue - said the impact of the Conservatives planned tax cuts would be "significantly regressive".

By contrast, a 1p across-the-board income tax rise "would hit richer earners harder than the poorest, with the highest earners paying the most".

He said: "Under existing powers, the Scottish Parliament may be facing a ‘devil’s choice’ between doing nothing and thus allowing tax cuts for higher earners, or increasing taxes across all bands, including for middle and potentially lower earners.

"Planned new powers, if negotiated successfully, would open up greater possibilities for a Scottish-specific approach to tax and spend.

"That is why the current negotiations between the Scottish and UK Governments are so critical."

Another think tank, the Resolution Foundation, last week said a future Scottish Government would only be able to raise significant extra revenue if it put up the basic rate of income tax, because of the relatively small number of higher rate payers.