Military staff stationed in Scotland to get compensation for income tax hike

19 July 2018, 06:40

Army soldiers

A £4 million plan to "protect" military personnel in Scotland from any income tax rises has been announced by the UK Government.

The measure, unveiled by Defence Secretary Gavin Williamson on Thursday, follows tax changes introduced by the Scottish Government, which came into force in April.

The Ministry of Defence (MoD) said its plan to compensate troops with an annual payment will help around 8,000 personnel "who would otherwise be negatively affected by the income tax hikes".

The move means that all British troops will pay the same income tax, regardless of where they are stationed.

The Scottish Government said the armed forces community in Scotland benefits from a range of services not available elsewhere in the UK, such as free school meals and prescriptions.

Announcing the proposal, Mr Williamson said: "It is completely wrong for the brave men and women of our Armed Forces to be punished for serving in Scotland by unfair raids on their pay packets by the Scottish Government.

"That's why we have taken this urgent action to ensure that our troops are treated equally and fairly.

"I'm proud that the UK Government recognises the sacrifices our Armed Forces make across the United Kingdom and the world, and that today we can reassure our service personnel that they will not be left hundreds of pounds out of pocket because of decisions taken by the Scottish Government."

The Scottish changes, introduced at the start of the 2018/19 tax year, saw the higher and top rate of income tax rise to 41p and 46p respectively. There is a new intermediate rate of 21p on income between £24,000 and £43,430, as well as a 19p "starter rate" on earnings between £11,850 and £13,850. The other earning brackets match UK tax rates.

The Scottish Government said the new system makes the country the fairest taxed part of the UK, but the Conservatives claimed Scotland is now the highest taxed part.

The Ministry of Defence said it had concerns that the changes could result in Scotland becoming a less attractive place for military personnel to be posted to.

It expects its new measure to help with the recruitment and retention of people with specialist skills, such as aircraft and submarine engineers.

The UK Government said its proposal will see "mitigation payments" of between £12 and £1,500 paid to regular personnel who pay Scottish Income Tax, regardless of where in the world they are serving.

Made retrospectively for the current tax year, the payments are expected to cost the MoD £4 million, with the system subject to an annual review.

Finance Secretary Derek Mackay said: "As a result of the Scottish Government's progressive tax system 70% of people in Scotland are paying less tax this year than they did last year for a given income and we hope those who have seen their tax bills reduce will not be disadvantaged by the UK Government's proposals.

"We are fully committed to supporting the armed forces community and armed forces families in Scotland benefit from services not available elsewhere in the UK, such as free school meals, prescriptions and eye tests, and tuition fee and living cost support in higher education when they are ordinarily resident.

"It is disappointing that, despite making an offer to discuss the differential taxation of military personnel, the Scottish Government has not been consulted on the proposal announced by the MoD."