Commenting on today's UK Budget, Moira Kelly, chair of the Chartered Institute of Taxation's Scottish Technical Committee, said:
“The Chancellor’s decision to increase both the personal allowance and higher rate income tax threshold may be good news for taxpayers, but it could be bad news for Derek Mackay as he tries to manage the Scottish budget.
“Today’s announcements highlight the practical difficulties of having control over some – but not all – aspects of the income tax regime.
“Because the Scottish Government has no control over the level at which the personal allowance is set, it means that thousands of people who paid Scottish income tax this year will be taken out of the income tax system altogether, resulting in a loss of revenues that would otherwise have gone directly to Holyrood.
“With a median income of £24,000 per year in Scotland and only 2.5 million taxpayers, losing tax contributions from several thousand individuals can have a significant impact on the Scottish budget.
“The Scottish Government does, however, have control over rates and bands, including the power to set a higher rate threshold for Scottish taxpayers.
“However, it is unlikely that they will follow the UK Government’s lead in increasing the higher rate threshold to £50,000 from next April, highlighting a growing gulf between Scottish and English taxpayers.
“For those who are able to – such as self-employed business owners – this is likely to increase attractiveness of reorganising their tax arrangements to opt out of Scottish income tax and into UK-wide corporation tax in order to reduce their liabilities”.