Johnson tax proposals risk Scotland being unable to attract or retain key individuals

French Duncan | 04 July 2019

Proposed tax threshold changes risk Scotland being increasingly unable to attract or retain key individuals in the future according to leading accountants and business advisors French Duncan. Under Boris Johnson’s tax proposals to raise the higher rate tax threshold to £80,000 for the rest of the UK, Scots could find themselves paying up to an additional £7,844.07 a year in tax.

While £80,000 per annum would be regarded as being well paid by many Scots this could seriously impact the ability of employers to attract and retain many thousands of key staff members in financial services, in medicine, in the law, and in business. At a time when Brexit uncertainty has already caused many well qualified and experienced individuals to seek employment outside the UK, making Scotland a less financially attractive prospect can only be harmful.

Stephen Oates, tax director with French Duncan, explained: “At a time when there has never been greater competition for Scotland to attract the very best people for key jobs, the implementation of this tax policy by an incoming prime minister would have serious repercussions for the Scottish economy if not replicated by the Scottish government.”

“The existing Scottish government tax policy already has the potential to negatively impact upon the ability of firms in Scotland to attract key personnel but this proposed shifting of tax thresholds would accelerate the negative impact on recruitment and could potentially cause serious problems in a very short period of time. Interestingly, the median gross annual earnings for Scottish public sector staff are £32,650, which is £764 higher than the rest of the UK. As the higher rate of taxation, compared to the rest of the UK, starts at £26,993 in Scotland it means that a substantial number of Scots are already paying a higher rate of tax anyway for doing the same job as everyone else in Britain.”

Stephen added: “This new proposal, however, would seriously impact on tens of thousands of Scots. Edinburgh, for example, has the highest percentage of highly skilled workers (38.6%) of any city in the UK including London.  It has the highest average gross disposable income per resident of any UK city, and the second highest median workers salary of anywhere after London.”

Stephen continued: “The proposed changes impact higher paid employee across all of Scotland and not just on Edinburgh’s financial and professional services market.  It makes it more difficult to hire a rural GP in the Scottish islands, to get a dentist in Inverness, a senior policeman in Dumfries, or a lawyer in Dundee.”

“Tax differentials within the same country will continue to produce problems which will worsen skills shortages in key areas. The situation is further exacerbated by Boris Johnson’s proposal to increase National Insurance Contributions (NIC) to pay for the tax cut for higher earners. As NIC is not devolved, better paid Scots will be paying higher NIC without benefitting from the increase to the higher rate tax threshold.”

Stephen concluded: “Although this is a proposal at the moment it has the potential to cause a serious and unassailable financial rift between Scotland and the rest of the UK. The current SNP tax policy will produce the same issues over time, but this idea will simply fast track this problem to the top of the agenda within days of it occurring. All politicians need to be aware of policies which produce unintended consequences and anything which results in a key part of the UK become a substantially less attractive place to work needs to be reconsidered immediately.”

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