Top-rate taxpayers in Scotland will pay at least £1,500 a year more compared to the rest of the UK, according to a budget report by the Scottish Parliament.
The research found the extra money raised will be “almost entirely offset” by block grant deductions.
Although a majority of taxpayers (56%) will pay less in Scotland, higher rate taxpayers earning more than £50,000 will pay a minimum of £1,500 extra in income tax, the Scottish Parliament Information Centre (Spice) said.
Those earning below £27,000 will pay approximately £21 less per year on average, Spice has calculated.
Analysis of last week’s draft Budget by Spice found the Scottish Government is forecast to raise £650 million more than if Scotland matched the rest of the UK’s income tax rates.
But the additional revenue “is only just managing to offset the block grant adjustment” – the amount deducted from the Scottish Government’s total block grant to reflect tax receipts foregone by the UK Government.
Following the budget, Scottish Fiscal Commission chief executive John Ireland said the Scottish Government should start planning for “a half a billion-pound hit” to the 2021-22 budget from income tax reconciliations.
In its report into Thursday’s draft budget, Spice said: “The Scottish Government’s decision not to replicate (the rest of the UK’s) tax policy also means that tax receipts are forecast to be around £650 million higher than would otherwise be the case, before accounting for any behavioural responses.
“However, these higher tax revenues are forecast to be almost entirely offset by the deduction to the Scottish budget via the block grant adjustment (BGA).
“SFC forecasts estimate that this £650 million differential will only generate £46 million more than is deducted by the BGA.
“So, rather than generating an additional £650 million for the Scottish budget, the different income tax policy is only just managing to offset the BGA.”
On the often-contentious issue of local government funding, Spice said this year’s proposed settlement is “more generous” — a real-terms increase of £159 million (1.6%) — although the funding for the non-ring-fenced, discretionary areas of spending “is essentially flat in real terms”.
Spice also said future funding for public transport infrastructure such as new rail routes, bus services, electric vehicles “remain dwarfed by the commitment to invest £6 billion over the next 10 years in dualling the A9 and A96 trunk roads” plus others.
A Scottish Government spokesman said: “Scotland continues to have the fairest and most progressive income tax system in the UK, with more than half of taxpayers paying less income tax in Scotland than elsewhere in the UK and no Scottish taxpayer will pay more income tax in 2020-21 on their current income.
“Based on commitments made by the UK Government in their Autumn Budget 2018, we do not expect any further increase in income tax divergence between Scotland and the rest of the UK this year. It is now up to the UK Government to ensure that divergence does not increase when they deliver their Budget on 11 March.”
He added: “Income tax reconciliations applying in future years have yet to be confirmed. Decisions on their management can only be taken in each Budget process when the available resources for that year, and the reconciliation applying, will be known. The Scottish Government will ensure that any negative reconciliation is dealt with in a competent, responsible and balanced way.
“It is already clear that the current limits on the use of the reserve and borrowing powers are inadequate to manage the level of budget volatility in the current system. This is why we are seeking changes to these from the UK Government in advance of the review of the Fiscal Framework.”
Responding to the findings about transport investment, Scottish Greens co-leader Patrick Harvie said: “Away from the SNP spin, these figures show this budget for what it is – an inadequate response to the climate emergency.
“This report shows that in high-intensity sectors like transport, the Scottish Government are using the right rhetoric on climate but pursuing a business-as-usual approach.”