Income Tax Reform Needed To Boost Growth In Scotland

Edinburgh and Glasgow | Rathbones, one of the UK’s leading wealth and asset management groups and one of the largest in Scotland, has called for a renewed focus on Scotland’s long-term economic competitiveness to attract investment, skilled professionals and entrepreneurs.

Rathbones makes its intervention following Anas Sarwar’s appointment as Minister of State for Trade in Andy Burnham’s new UK Government. The wealth manager, which employs more than 400 people across its two offices in Scotland, said Sarwar’s role creates an opportunity to put investment and business in Scotland higher up the national agenda.

Rathbones acts for a range of clients across Scotland, including professionals in key sectors such as energy, law and accounting, business owners, as well as charities and IFAs. The wealth manager highlighted Scotland’s devolved income tax regime as ripe for review. Scotland has six income tax bands, compared with three in England and Wales.

Higher earners in Scotland pay 42% income tax from £43,663, compared to 40% elsewhere in the UK, while top earners face up to 48%.

Rathbones said this complexity and divergence from the rest of the UK risks becoming a barrier when employers are trying to recruit experienced talent or persuade people to relocate north of the border.

Gordon Lawrie, Head of Rathbones’ Edinburgh office, said:

“Having a senior Scottish Labour figure at the heart of government in Westminster presents an opportunity to strengthen Scotland’s voice on the factors that will shape its long-term competitiveness. Across Scotland, we act for people in leading businesses and world-class universities and see the challenges they face in attracting and retaining skilled senior people.”

“There is a clear tension between Scotland’s devolved income tax regime and wider UK growth ambitions. The current system is significantly more complex than elsewhere in the UK and places a materially higher burden on many professionals, business owners and senior executives. Our advisers see individuals who work in Edinburgh but choose, for tax reasons, to live south of the border and commute – this is not good for Scotland.”

Rathbones said the new administration looking to drive growth across the UK should champion policies that strengthen competitiveness, encourage investment and support the attraction and retention of talent.

Adam Drummond, Head of Rathbones’ Glasgow office, said:

“The income tax regime may be a deliberate policy choice, but it has consequences. A more punitive and complex tax system risks weakening Scotland’s attractiveness as a destination for investment, entrepreneurship and skilled workers at a time when growth is the priority.

“Ensuring Scotland remains an attractive place to live, work and build a business should be central to the UK’s growth agenda. A simpler, more competitive system would help Scotland benefit fully from the talent and investment it needs.”