Taxation and the Scottish Parliament Election
On the eve of the Scottish parliament election, personal taxation is among the many factors voters will consider as they head to the polls on Thursday.
In the south of Scotland, taxation policies of the main political parties may face closer scrutiny as residents compare their earnings with those of colleagues across the border.
Scott McIver, a senior tax manager living in Dumfries, works for Carlisle-based accountancy firm Armstrong Watson. His colleague, Graham Poles, is a tax partner at the same firm but resides in Cumbria.
Although both hold similar positions within the same company, their monthly take-home pay differs—not due to salary differences but because of their respective postcodes.
Since 2018, the Scottish government has implemented what it describes as a more "progressive" six-tier income tax system. This system taxes lower earners slightly less than their counterparts elsewhere in the UK, while imposing higher rates on top earners.
The Scottish system includes a 19% "starter" tax rate—below the UK's 20% basic rate—followed by a 20% basic rate, a 21% intermediate rate, and three higher rates at 42%, 45%, and 48%.
Within Armstrong Watson, higher earners have begun to notice the impact of these differing tax rates on their monthly pay.
Poles explained:
"Being a Carlisle firm, we have people [who] live in Scotland and travel down into Carlisle and they're sitting next to colleagues of theirs who live in Carlisle but are subject to a different tax rate.
"I know of colleagues that are being paid at that kind of £45,000-£50,000 level and therefore they're now higher rate taxpayers in Scotland and subject to 42% tax.
"Their equivalent colleague sitting right next to them in England is still a basic rate taxpayer."
For example, someone living in Gretna earning £50,000 annually will pay £1,496 more in income tax each year than colleagues living in Carlisle earning the same amount.
Most Scots benefit under the current tax system. The Scottish Fiscal Commission forecasts that 55% of Scots will pay less tax than if they lived elsewhere in the UK.
However, the maximum saving for lower earners is around £40 annually, while higher earners face significantly steeper rates.
McIver, based in the Dumfries office, said the difference in take-home pay between himself and Poles is not enough to motivate him to relocate south of the border at present.
"I have family in Dumfries, so I wouldn't be looking to uproot them and move to Carlisle to take advantage of paying less tax at this amount," he said.
"The tax rate would have to be significant to uproot your whole lifestyle as it can't just be a paper exercise.
"Tax is just one thing to consider but there is general acceptance that if you're living in Scotland then you pay more tax."
The difference between the two tax systems becomes more pronounced for senior managers, partners, and executives, Poles noted.
"You get to a salary of around £100,000 and the difference is £4,000, which is not an insignificant sum of money," he said.
"I think at that point, it starts to put in people's minds, whether they would look again at being on one side of the border or the other."
The Scottish government holds devolved powers over public spending, using income generated by higher tax revenue to partly fund public services.
In England, the maximum university tuition fee for the 2026/27 academic year is £9,790 for standard full-time courses. In contrast, Scottish residents benefit from free university tuition fees.
Additionally, Scottish residents do not pay for NHS medical prescriptions, whereas in England there is a £9.90 prescription charge for 2026/27.
However, the UK government states that, in practice, 89% of prescriptions dispensed in England are free due to exemptions for children, those over 60, low-income individuals, and people with specific medical conditions.
Water charges in Scotland are included within council tax, averaging £532. Despite an 8.7% increase in April, these remain among the lowest water charges in the UK.
Both McIver and Poles report that clients frequently evaluate the financial advantages and disadvantages of living on either side of the border, and they often discuss the implications of their own decisions.
Poles said: "Whenever Scott and I come together there is that discussion because we have sons of similar age. I can say, 'you get free tuition fees, you get free prescriptions', and in the end over the course of a lifetime a Scottish person is paying more tax.
"But are they getting everything? Is it fair? Is it equitable? Probably not, but there's swings and roundabouts with all of these things isn't there?
"When I go to the Glasgow office it is never discussed, but if I'm in the Carlisle or Dumfries offices, it's definitely more of a talking point."
Political Party Tax Policies Ahead of the Election
As the Scottish elections approach, the six main political parties have outlined their income tax plans in their manifestos.
The Scottish Conservatives propose raising the income tax starting threshold in Scotland in line with inflation. They also pledge to increase the higher rate threshold to £50,270, aligning it with the UK tax system.
The Scottish National Party (SNP) asserts that Scotland's income tax system is the "fairest and the most progressive in the UK" and intends to maintain it. They do not plan to add more tax bands or rates during the next parliamentary term and aim to simplify the system.
Scottish Labour commits to not increasing income tax rates during the next parliament. Their goal is to reduce the tax burden they believe the SNP has placed on Scots as the economy grows again.
Tax Thresholds
The Scottish Liberal Democrats prioritize raising tax thresholds in line with inflation and beginning to close the tax gap with England. They have accepted an offer from the Hunter Foundation to fund a specialist team to study the current system's impacts and develop a new system to increase tax revenue.
Reform Party Scotland plans to restore income tax bands in Scotland to align with the three UK bands. They also propose implementing a 1p cut below each band, with a medium-term goal of a 3p cut within the first five years.
The Scottish Greens aim to retain a "progressive and redistributive" income tax system. They also propose setting a higher tax rate on landlords' income from rental properties.
