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Third of Scottish taxpayers to face higher bills

The two highest rates of tax are to increase by 1p.

Changes in the Scottish Budget will see income tax bills rise for three out of 10 taxpayers – although more than half will pay less than if they lived south of the border.

The Holyrood Finance Secretary Derek Mackay is proposing a series of changes to the income tax system, which will see the two highest rates increased by 1p.

While the basic rate of income tax will be frozen at 20p, Mr Mackay plans to establish a new intermediate rate of 21p, which would apply to earnings between £24,000 and £44,273.

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Income tax graphic

But he is also bringing in a “starter rate” of 19p, which will be paid on the first £2,000 of taxable earnings.

Those earning less than £26,000 a year will pay less in income tax than they would if they lived elsewhere in the UK, the Scottish Government said.

Its figures showed 55% of Scottish taxpayers will pay less compared to south of the border – with 45% of people paying more.

In addition almost a third (30%) of taxpayers in Scotland will pay more in income tax next year than in 2017-18 – with the changes coming for those on salaries of £33,000 a year and above.

Meanwhile someone in Scotland earning £150,000 will pay £1,774 more than if they lived elsewhere in the UK.

But almost two thirds (64%) of current basic rate taxpayers in Scotland will end up paying less next year than in England.

The Finance Secretary told MSPs at Holyrood: “The specific tax reforms I have announced today will raise an additional £164 million for investment in our public service and our economy.”

Mr Mackay went on to state that decisions in the Budget had “enabled me to reverse the real terms cut that the UK Government has imposed on our resource budget next year, whilst ensuring that Scotland is not just the fairest taxed part of the UK but, for the majority of taxpayers, the lowest taxed part of the UK”.

First Minister Nicola Sturgeon said on Twitter: “Progressive changes in tax are necessary to protect public services and invest in economy. However, seven in 10 taxpayers will pay less than they do now – and more than half of taxpayers in Scotland will pay slightly less than they do in rest of UK.”

The income tax changes were announced as the Scottish Fiscal Commission, set up to provide official tax and economic forecasts for Scotland, warned of a “subdued outlook for economic growth”.

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