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Scottish Budget

Small firms demand Mackay leave tax unchanged

Derek Mackay

Derek Mackay: Thursday Budget (photo by Terry Murden)


Most business owners have urged the Scottish Government leave income tax rates unchanged, according to a poll that scotches the myth that most company owners are high earners.

The survey by the Federation of Small Businesses reveals that two-thirds of those running their own business earn the basic rate of tax while only 1.6% are in the top bracket.

The FSB has written to Finance Secretary Derek Mackay ahead of this week’s Budget indicating that 58.3% of those sampled do not want to see tax rises and 65% warn of damage to the economy. 

The survey of 315 business owners was conducted in November ahead of widely-predicted tax rises in Thursday’s Scottish Budget.

Andy Willox, FSB’s Scottish policy convenor, said: “A clear majority of those that run their own business in Scotland don’t want the Finance Secretary to increase income tax rates.

“Those asked warned of the impact on the wider economy, and little wonder with pressure on household incomes and uncertainties about the impact of Brexit.”

Asked to choose between the four options outlined by the Scottish Government in relation to income tax – where every option would see income tax revenue increase – just under half of all business owners preferred a tax regime with the largest number of bands and rates.

Andy Willox

Andy Willox: ‘government must steady Scotland’s economic ship’


About a third preferred the option where rates were hiked for high earners and a tenth preferred a hike for mid and high earners. Just 7% of respondents preferred the option where a small number of additional rates were added. 

The research also suggests that, of those that run their own business, about two thirds (64.8%) are basic rate taxpayers and earn between £11,501 and £43,000. About a fifth (22.5%) earn between £43,001 to £150,000 and only 1.6% fall into the additional rate bracket by earning more than £150,000 per year. 

Mr Willox said: “This data scotches the myth that business owners are all high earners. Further, when forced to choose between Ministers’ palette of tax options, the largest share of business owners chose what could be regarded as the more progressive option. 

“They seem to be less worried about their own wallets and more concerned about the wider economy. 

 


“That’s why, overall, smaller businesses don’t want to see tax change. As FSB warned ahead of the UK Budget, trading conditions are already turbulent, and additional tax hikes – for them or their customers – are not what we need right now. The Scottish Government must resist the siren song of a big change budget, and do what they can to steady Scotland’s economic ship.” 

In its correspondence to the Mr Mackay, the FSB also makes the case for action to make the Scottish non-domestic rates system more user-friendly as well as a comprehensive plan to improve local infrastructure including roads and broadband.

The campaign group further argues that income from the apprenticeship levy should be used to help smaller firms build their teams’ skills.

Mr Willox said: “The Scottish Government must squeeze every drop of value out of existing budgets. That’s why it is important that plans are developed to ensure their spending power delivers for Scotland’s local economies. Addressing Scotland’s patchy local infrastructure network would be a good place to start.”

Private sector growth slows 

Output in the Scottish private sector increased in November, albeit at the softest pace since March.

Weak activity growth coincided with a softer rise in new business. Nevertheless, businesses increased employment in line with a stronger degree of confidence regarding future output, according to the seasonally adjusted headline Bank of Scotland Purchasing Managers Index.

Businesses remained upbeat towards future growth prospects despite sluggish growth in output and demand.

In fact, the degree of optimism edged higher across the private sector. Amid greater business confidence, firms added to their payrolls for a sixth consecutive month in November. However, the rate of job creation across the Scottish private sector was modest and eased slightly

SME Index rises

CYBG’s SME Health Check Index for Scotland, in association with CEBR, rose five points from the previous quarter to hit 49. There were several positive signs in that economic growth (as measured by GDP) improved from the second quarter.

Also improvements in employment and capacity should provide a boost later next year, it said. However, business cost measures, lending and confidence all deteriorated.

Across the UK the SME Health Check Index fell to its lowest level since January 2014.

 



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