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%).
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
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".
-
Christmas at Chatsworth: review of The Cavendish Hotel at BaslowMoneyWeek Travel Matthew Partridge gets into the festive spirit at The Cavendish Hotel at Baslow and the Christmas market at Chatsworth
-
Tycoon Truong My Lan on death row over world’s biggest bank fraudProperty tycoon Truong My Lan has been found guilty of a corruption scandal that dwarfs Malaysia’s 1MDB fraud and Sam Bankman-Fried’s crypto scam
-
Beating inflation takes more luck than skill – but are we about to get lucky?Opinion The US Federal Reserve managed to beat inflation in the 1980s. But much of that was down to pure luck. Thankfully, says Merryn Somerset Webb, the Bank of England may be about to get lucky.
-
Rishi Sunak can’t fix all our problems – so why try?Opinion Rishi Sunak’s Spring Statement is an attempt to plaster over problems the chancellor can’t fix. So should he even bother trying, asks Merryn Somerset Webb?
-
Young people are becoming a scarce resource – we should value them more highlyOpinion In the last two years adults have been bizarrely unkind to children and young people. That doesn’t bode well for the future, says Merryn Somerset Webb.
-
Ask for a pay rise – everyone else isOpinion As inflation bites and the labour market remains tight, many of the nation's employees are asking for a pay rise. Merryn Somerset Webb explains why you should do that too.
-
Why central banks should stick to controlling inflationOpinion The world’s central bankers are stepping out of their traditional roles and becoming much more political. That’s a mistake, says Merryn Somerset Webb.
-
How St Ives became St Tropez as the recovery drives prices sky highOpinion Merryn Somerset Webb finds herself at the epicentre of Britain’s V-shaped recovery as pent-up demand flows straight into Cornwall’s restaurants and beaches.
-
The real problem of Universal Basic Income (UBI)Merryn's Blog April employment numbers showed 75 per cent fewer people in the US returned to employment compared to expectations. Merryn Somerset-Webb explains how excessive government support is causing a shortage of labour.
-
Why an ageing population is not necessarily the disaster many people think it isOpinion We’ve got used to the idea that an ageing population is a bad thing. But that’s not necessarily true, says Merryn Somerset Webb.
