AN eleventh-hour deal between Westminster and Holyrood has stopped hundreds of thousands of Scots couples losing a £260 tax break in next year’s budget
Finance Secretary Derek Mackay told MSPs the Treasury had agreed to new legislation protecting the marriage allowance north of the border in 2018-19.
The allowance is currently available only to couples with an earner on the basic 20p income tax rate, and the creation of new 19p and 21p rates had thrown the system up in the air.
Thousands of people moving onto the new rates would have lost the allowance.
However on the eve of today’s final vote on the Budget Bill, Mr Mackay said the Treasury has agreed to changes to ensure Scottish income taxpayers didn’t lose out.
The allowance will remain available to anyone earning up to £43,430 if their husband, wife or civil partner does not work or earns a low wage.
But Mr Mackay also criticised the UK Government for taking so long to make a decision.
As part of the budget process, MSPs yesterday voted 67-50 to pass the resolution setting income tax rates and thresholds for 2018-9 in the biggest shake-up of tax since devolution.
The budget creates a 19p starter rate up to £13,850, narrows the 20p basic rate to between £13,851 and £24,000, adds a 21p intermediate rate up to £43,000, and raises the 40p higher rate to 41p above £43,431 and the 45p additional rate top 46p above £150,000.
Mr Mackay said the changes meant lower bills for those earning below £33,000, some 70 per cent of Scots, although the difference is just £20 a year as a result of SNP policy.
He also said most Scots would pay less than their English equivalents.
The Tories pointed out more than 1m Scots would pay higher income tax than their peers south of the border, and warned it could make Scotland less attractive to business.
Mr Mackay said: “Scotland is set to become the lowest taxed part of the UK. Our progressive reforms to income tax will deliver greater tax fairness and additional funding to protect vital public services.
“I'm confident that these proposals will deliver the best outcome for the people and the economy of Scotland. The best deal anywhere in the UK.”
Tory Murdo Fraser accused the SNP of breaking its 2016 manifesto promise not to raise the basic rate, and said it was not just the rich who would pay more but middle earners as well.
He asked Mr Mackay to apologise to the 890,000 basic rate taxpayers now paying more.
He said: “This rise in income tax penalises hardworking Scottish families. In making Scotland the highest-taxed part of the UK, it will condemn us to more years of sluggish economic growth, depriving the government of much-needed tax revenue as a result.”
Labour’s James Kelly said the budget was not radical enough, and left councils facing a £386m shortfall.
He said: “This budget tinkers around the edges on tax when real change was required. Services will be cut as a result.”
LibDem leader Willie Rennie called the budget a “missed opportunity”, but said two of his MSPs would vote for it as it contained ferry funding for their Northern Isles constituencies.
He said: “It fails to invest the necessary funds to transform education and make a step change in mental health services. Without the investment required we cannot give the budget our full support.
“We will continue to make the case for protecting public services and investing in people and skills to boost the economy.”
Today’s final budget vote will be on a deal agreed last month by the SNP and Greens.
Green MSP Patrick Harvie said his party had driven the “bold reform” on tax, and would make reform of local taxation its priority in the 2019-20 budget.
But he also attacked the SNP for falling into a “trap” by boasting about Scotland being the lowest taxed part of the UK, as this made it harder to commit to progressive taxation.
He said: “The Scottish Government should not be using this rhetoric to compete with our neighbours, and certainly not the current Conservative UK government on the notion of tax competition.”
Moira Kelly of the Chartered Institute of taxation said that, with less than six weeks to the start of the tax year, it was very late to amend legislation in respect of marriage allowance, pension relief and gift aid, and reform was needed to improve the system.
She said: “The current Scottish budget process does not lend itself well to ensuring adequate scrutiny of devolved tax legislation. An annual Scottish Finance Bill would go some way towards addressing some of the issues encountered in this year’s budget process.”
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