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As income tax changes approved...

Parents face £900 hike in fees at city’s private schools

The potential loss of pupils would equate to the entire roll call at George Heriot’s


 

Parents face paying an extra £900 to send their children to Edinburgh’s top fee-paying schools because of the partial removal of business rates relief, rising teachers’ pay and spiralling pensions contributions.

Plugging a £9 million funding gap would result in a hike in fees of 7% which may be too much for some parents to shoulder, says a report by independent consultancy BiGGAR Economics.

One in four Edinburgh pupils are educated in the private sector compared to a national average of one in 25. The report says: “This is a significant sum of money for parents, and will be compounded for the parents who have more than one child studying at one of the independent schools.

“Based on discussions with the Edinburgh independent schools it is clear that many parents would not be able to bear this financial burden.

“For around 15% of parents this would be completely unaffordable, leading to these pupils dropping out of independent schools. This equates to an estimated 1,750 pupils, which would be equivalent to a school the size of George Heriot’s closing.

“If this scenario were to occur it was estimated that income across the Edinburgh independent schools would fall from £143.4m currently to £130.4m.”

‘Exodus’ warning over income tax changes

Opposition MSPs were unable to halt the Scottish Government’s new income tax thresholds amid a fresh warning that the increase in top rates of tax may encourage an exodus of higher earners.

Both Labour and Tories accused ministers of raising the cost of living for average earners, while Labour would impose an even higher tax burden on those in the top income brackets.

Labour said ministers had handed themselves a tax cut whilst hammering councils with £230 million of real terms cuts. 

Everyone up to £124,375, including SNP Ministers, will see their income tax bill cut by £140 next year. 

The Rates Resolution passed at Holyrood with the sole support of SNP MSPs, with Green MSPs abstaining to allow the tax cut to sail through. 

The Scottish Conservatives also opposed the Resolution in the Scottish Parliament today and said the SNP had broken its manifesto pledge.

Labour’s finance spokesman, James Kelly, said: “The SNP’s tax plan means tax cuts for chief executives and public service cuts for communities across Scotland.  

“The budget is set to cut funding for councils by £230 million that will put services like schools and social care at risk.  

Murdo FraserMurdo Fraser, Scottish Conservative finance spokesman, pictured,said: “The increasing block grant from Westminster means that the SNP has more money to spend and does not need to widen the tax gap between Scotland and the rest of the UK.

“The SNP has broken their repeated promises to the Scottish taxpayers. Thanks to the SNP taxes everyone earning over £26,990 a year, ordinary hard-working families, will pay more in tax in Scotland that others pay in the rest of the UK. 

“Businesses have repeatedly warned that this tax divergence will be bad for the Scottish economy.

“This is particularly worrying as the Scottish economy has been underperforming, and will continue to underperform, the UK economy as a whole. 

“The reality is that no one benefits from the SNP’s tax changes, everyone ends up worse off.”

Alexander Garden, the new chairman of the Chartered Institute of Taxation’s Scottish Technical Committee said: “As the tax bills for those paying the higher and top rates of tax increase relative to the rest of the UK, there are concerns that some of those taxpayers (being less than 15 per cent of all Scottish taxpayers, but contributing almost 60 percent of all devolved income tax revenue) will seek to take steps to legitimately limit their tax liabilities.

“These taxpayers may choose to limit the number of hours that they work to avoid being pushed into higher rates of tax. They may also choose to increase the amount of pension contributions that they make, effectively increasing the thresholds above which they pay higher rates of tax. 

See also: Who is a Scottish taxpayer? Income tax explained

“For the self-employed, the opportunity to pay lower rates of corporation tax by incorporating their businesses, as opposed to paying income tax, may also become a more attractive option. Higher earners, or those with greater mobility, may even choose to relocate away from Scotland.” 

Finance Secretary Derek Mackay said changes to income tax in Scotland will raise around £11.7 billion in 2019/20, while protecting low and middle income earners.

He said the plans outlined in the Scottish Budget will raise vital revenue to support investment in public services.




“Our decisions have resulted in a more progressive tax system, protecting those lower and middle income taxpayers, while raising additional revenue to invest in our public services and the Scottish economy. Our policies on tax make Scotland an attractive place to live, work and invest.

“The Scottish Budget proposes an additional £2 billion of investment. It provides an increase of almost £730 million for health and care services, more than £180 million to raise attainment in our schools and gives a vital boost to our economy through a £5 billion infrastructure programme.

“And it does so in the context of continuing UK austerity and against a backdrop of uncertainty around Brexit.”

A final vote on the Scottish Budget 2019/20 will be held on Thursday.

Mr Mackay insists the proposals mean 55% of taxpayers will pay less income tax next year than if they lived elsewhere in the UK and 99% will pay less income tax than they do this year on their current income.

Income tax rates will remain the same in 2019-20, however there will be an increase to the size of the Starter and Basic Rate bands by inflation to protect the lowest and middle earning taxpayers.

Freezing the higher rate threshold – paid by only the top 15% of taxpayers in Scotland – at £43,430 is forecast to deliver an extra £68 million.

The Income Tax rates and bands for 2019/2for Scottish taxpayers

Band

Range*

Maximum taxable income

Rate

Starter

Above £12,500 to £14,549

£2,049

19%

Basic

Above £14,549 to £24,944

£10,395

20%

Intermediate

Above £24,944 to £43,430

£18,486

21%

Higher

Above £43,430 to £150,000

£106,570

41%

Top

Above £150,000

N/A

46%

* The ranges of relevant income assume entitlement to a full standard Personal Allowance (which is set each year by the UK Parliament).  The Personal Allowance is reduced by £1 for every £2 of income that exceeds £100,000.

 Source: KPMG

Who is a Scottish taxpayer? Income tax explained



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