It's not just Scotland's rich who will feel the pinch

Nicola Sturgeon's income tax plans won't endear her to middle Scotland, says Merryn Somerset Webb.

I wrote yesterday about the trouble with different tax rates in different parts of one country. In it, I focused on Scotland's high earners. But an interesting piece from Alf Young in The Times today points out that it isn't just about them.

Nicola Sturgeon has said that Scottish tax payers aren't going to see the 40% threshold rise in the same way as everyone else will. Their's will rise to £45,000. The Scots' will stay at £43,387. That might not sound like a big deal. But it is bigger than you think.

You see, the Scots don't set national insurance (NI) rates or thresholds. Westminster does in line with the income tax rates it sets. So from £8,060, you pay 12% NI. And from the 40% limit up, you pay 2%. When the new threshold comes in, the English and Welsh will pay 12% up to £45,000 (for a total marginal tax rate of 32%) and 2% beyond (42%).

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The Scots will pay 12% up to £45,000 as well. But between £43,387 and £45,000, they will also pay 40% income tax. A total marginal rate of 52% paid, as Young puts it, "on a slice of income that will attract only a 32% rate elsewhere."

That doesn't seem much of a way to endear your middle managers, your teachers, your lecturers, your nurses and your small business owners to you, does it? Perhaps it won't be just the rich who soon look around Scotland and think about "exploring market opportunities for their skills in the rest of the UK".

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.