Scotland has both a larger number of personal tax rates and a higher rate of personal taxation than the rest of the UK.
That double whammy, says Paul Frame, regional managing partner for Scotland at Evelyn Partners, creates problems for financial services businesses.
The difference in the income tax rate between Scotland and England is 3 per cent, and Frame says the challenge for financial services firms is that if they have staff “whose job can be done from anywhere, then many of them move over the border to England.
”If we want them to come into the office in Scotland, they say it is too far too travel, but won’t move nearer as it would mean extra taxes. They tell us if we want them to move to Scotland, then we have to increase their pay, as otherwise it would be a pay cut.”
Problem with attracting talent
But James Budden, head of retail marketing at Baillie Gifford, says the distances involved mean he thinks relatively few people are actually moving out of Scotland if they are still employed there.
Instead, he thinks the biggest risk is that individuals will not wish to relocate to Scotland in the first place. Budden’s view is that many talented financial services professionals may want to relocate to Edinburgh due to what he feels is a better quality of life, but that tax and public policy uncertainty make this a less attractive option.
This creates a problem for the industry as it may in future struggle to attract talent, whereas in the past this was not an issue.
Budden is English-born and relocated to Scotland for work. He says: “I don’t think the higher tax rate has had a huge impact yet, as it has only been in place a short while.
“Edinburgh is a great place to live: it’s affordable compared with London, and you can get to the hills or the coast very quickly.
“But I think if the higher tax rates become embedded, that is when it could become an issue and reduce the numbers of people who move here.”
In addition to a higher rate of income tax, there are also multiple tax bands, notably at 19 per cent, 20 per cent, 21 per cent, 42 per cent, 47 per cent and 50 per cent.
Stuart Johnson is a financial planner and head of McHardy Wealth's regional office. He says the differing rates make it more complicated to conduct financial planning, particularly as he is in the borders region of Scotland and thus clients that are near to England and the lower, less complex tax system.
Independent minded
The party with a majority in the Scottish parliament right now is the Scottish National Party, which is committed to Scottish independence.
