Key facts
- Higher earners in Scotland could save over £46,000 in income tax over five years by moving to England.
- A £250,000 earner could save £8,900 in the first year by relocating.
- Scotland's top income tax rate is 48%, versus 45% in England.
- Analysis suggests higher tax rates may lead to lower tax receipts for Scotland.
- Relocating could impact Scotland's ability to attract investment and entrepreneurs.
Scots earning higher incomes could significantly reduce their tax burden by relocating to England, according to an analysis by wealth management firm Rathbones. The firm found that an individual earning £250,000 annually could save £8,900 in income tax in the first year alone by moving south of the border and commuting back to Scotland for work. Over a five-year period, assuming a 2% annual salary growth, these savings could exceed £46,000.
The disparity arises from Scotland's higher top income tax rate of 48%, compared to England's 45%. Gordon Lawrie, head of Rathbones' Edinburgh office, noted that for high earners, the tax differences across the UK are becoming increasingly significant, allowing individuals to live in one jurisdiction and work in another with a different tax outcome.
Rathbones also pointed to the impact of the Personal Allowance taper, which results in a marginal income tax rate of 60% in England for earnings between £100,000 and £125,140, rising to 67.5% in Scotland.
Tax lawyer Dan Neidle's analysis suggests that Scotland's higher tax rates might be leading to decreased tax revenue, potentially collecting £22 million to £30 million less in 2024-25. Neidle posited that Scotland may have crossed the Laffer curve, where increasing tax rates leads to a reduction in overall tax receipts.
Adam Drummond, head of Rathbones' Glasgow office, warned that the departure of higher earners could harm Scotland's competitiveness and its ability to attract investment and entrepreneurs. The firm urged Scottish policymakers to consider a simpler tax system to enhance the nation's appeal for living, working, and doing business.