Poll suggests growing confusion over Scottish taxes

The CIOT has also published a tax table showing the differences in Scottish and UK income tax rates for the year ahead if, as expected, the government’s plans are passed without change.

The poll was undertaken by the Diffley Partnership and is the fourth to be conducted by CIOT since 2018¹.

The 2023 survey found:

• Only one in five (20 per cent) respondents correctly identified that income tax is a shared responsibility of the Scottish and UK parliaments. This is the lowest figure recorded since the survey was first conducted in 2018 (34 per cent) and is a fall of seven points on the 27 per cent recorded when the poll was last undertaken in 2021.
• More than half (52 per cent) incorrectly thought that the Scottish Parliament alone is responsible for setting income tax. This is the highest figure recorded since the survey began (2018: 41 per cent) and an increase of nine points on 2021 (43 per cent).

In answer to a further question, 55 per cent of those surveyed said they believed the amount of income tax they paid has gone up in the last few years. This is also the highest figure recorded since the survey began in 2018.

While the Scottish Parliament has the power to set rates and bands of income tax on non-savings, non-dividend income (i.e. income from a job, self-employment profits, pensions and rental income), a range of other income tax powers apply in Scotland that are set UK-wide.

They include things like setting the tax-free personal allowance, setting tax reliefs, collecting income tax and setting rates and bands of income tax paid on savings and dividends. National Insurance is also set on a UK-wide basis, and its rates and thresholds are tied to UK, not Scottish, tax rates.

If MSPs agree to the income tax proposals as published by the Scottish Government in December, it will mean further divergence between Scotland and the rest of the UK.

As previously highlighted by the Institute²:

• In 2023/24, Scots with earnings under £27,850 will pay less tax than someone on the same earnings elsewhere in the UK as a result of the 19p Scottish starter rate of tax – though the maximum difference will only be £21.62 per year.
• Increasing the higher rate of Scottish Income Tax to 42p means that someone earning £50,000 will pay an extra £63.38 a year in tax from April compared to the current tax year. They will pay £1,552.48 per year more on this level of income than someone on the same salary in other parts of the UK from April.
• Lowering the top rate threshold to £125,140 and increasing the rate to 47p means that Scots with earnings of £150,000 (the previous top rate threshold) will pay an additional £2,432.08 compared to this year. They will pay an extra £3,857.88 compared with someone earning the same salary elsewhere in the UK.

A tax table is provided at the foot of this email comparing expected Scottish and UK income tax liabilities for 2023-24 and the differences across different income levels³.

Sean Cockburn, chair of the CIOT’s Scottish Technical Committee, said:

On the opinion poll findings:

“The growing confusion among Scots over where income tax is set is concerning.

“Scots may be looking at the increasingly lively debate about levels of income tax and concluding that this means that power rests solely at Holyrood.

“The reality however is more complicated than that, as many important aspects of the income tax regime continue to be set on a UK wide basis, such as the amount of money someone can earn tax free and the amount of income tax that someone pays on their savings or dividend profits.

“A lack of understanding of how the tax system works is not a uniquely Scottish issue, but increasing divergence between the Scottish and UK income tax regimes means it will be important to ensure taxpayers can more easily understand where responsibility and accountability lies”.

On the income tax plans expected to be approved by MSPs later today, Cockburn added:

“The tax plans agreed by MSPs mean that the Scottish income tax system will continue to be slightly more generous to those on lower incomes, but increasingly less so to those with higher incomes.

“Taxpayers with income of less than £27,850 will pay up to £21 a year less income tax than those elsewhere in the UK, due to the 19p Scottish starter rate of tax.

“Meanwhile, those with incomes taxable at the higher and top rates of tax will see their liabilities increase as a result of the decision to lower the threshold for the Scottish higher rate of tax and the decision to increase the higher and top rates of tax by an additional penny”.

^Notes:

^{1. The survey was designed by The Diffley Partnership and invitations were issued online using the ScotPulse panel. The survey took place between 12 and 17 January 2023. The results for 2023 are based on a survey of 1,145 respondents and are weighted to the Scottish population by age and gender. The topline summary of responses can be downloaded here, and the data set downloaded here.}

^{2. Income tax divergence entrenched after today’s Scottish Budget (CIOT press release, 15 December 2022)}

^{3. Difference between Scottish and UK Income Tax liabilities in 2023/24 (figures rounded to the nearest £)}

^{The table below shows the difference in income tax liabilities between Scotland and the rest of the UK in 2023/24. Although Wales has the power to set a Welsh Rate of Income Tax, it has maintained parity with England and Northern Ireland.}

Earnings (£)	UK Income Tax (23/24, £)	Scottish Income Tax (23/24, £)	Difference (£)
10,000	0	0	0
15,000	486	464	22
20,000	1,486	1,464	22
25,000	2,486	2,464	22
27,850	3,056	3,056	0.00
35,000	4,486	4,558	-72
40,000	5,486	5,608	-122
43,662	6,218	6,377	-159
45,000	6,486	6,938	-452
50,000	7,486	9,038	-1552
55,000	9,432	11,138	-1,706
60,000	11,432	13,238	-1,806
65,000	13,432	15,338	-1,906
70,000	15,432	17,438	-2,006
75,000	17,432	19,538	-2,106
80,000	19,432	21,638	-2,206
85,000	21,432	23,738	-2,306
90,000	23,432	25,838	-2,406
95,000	25,432	27,938	-2,506
100,000	27,432	30,038	-2,606
125,140	42,516	45,877	-3,361
130,000	44,703	48,161	-3,458
150,000	53,703	57,561	-3,858
175,000	64,953	69,311	-4,358
200,000	76,203	81,061	-4,858
250,000	98,703	104,561	-5,858
300,000	121,203	128,061	-6,858
500,000	211,203	222,061	-10,858
1,000,000	436,203	457,061	-20,858