Troops to be compensated for Scottish tax hikes

Thousands of Armed Forces personnel set to be left “out of pocket” by SNP tax rises are to be compensated on an annual basis following an unprecedented intervention by the UK Government.

Gavin Williamson, the Defence Secretary, said around 8,000 troops stationed in Scotland would receive an annual payment to make sure they are not left worse off than their counterparts elsewhere in the UK.

He said the move would ensure that all troops, regardless of where they were deployed, would pay the same income tax despite the Scottish Government’s decision to create new income tax bands and increased tax levels.

Mr Williamson asked the Ministry of Defence in March to look at how to mitigate the impact, amid concerns it could result in Scotland becoming a less attractive place for military personnel to be posted to.

The measures will apply to nearly 75 per cent of armed forces personnel liable for Scottish income tax.

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 MoD said mitigation payments of between £12 and £1,500 would be paid, with a single payment made retrospectively for 2018/19, at a cost of around £4 million. The case for the mitigation is to be review annually.

David Mundell, the Scottish Secretary, said the Scottish Government’s decision to make Scotland the most highly taxed part of the UK meant that servicemen and women would be unfairly penalised and it was “absolutely right” for the UK Government to address the issue.

The SNP administration’s tax changes mean those earning over £26,000 paying more tax than those south of the border.

The new five-band system creates a 19p "starter" rate for lower earners and a 21p "intermediate" rate for earnings of more than £24,000. The higher and additional rates will also be increased to 41p and 46p respectively.

In the Armed Forces, the tax hikes will mean a staff sergeant paying an extra £117 a year in Scotland. An army major would pay £660 more while a lieutenant colonel would pay £863 extra, and a full colonel £1,013.

The Scottish Conservative MPs Douglas Ross and Kirstene Hair have been campaigning for Armed Forces personnel in Scotland to receive the same as their counterparts elsewhere.

Ms Hair, MP for Angus, said: “Armed Forces personnel sacrifice so much for our United Kingdom, whether working with Nato, through humanitarian efforts or in combat, and it is right they should be paid equally across the United Kingdom for the work they do.

“The SNP have demonstrated that they cannot be trusted to deliver for our Armed Forces and that they will reward service to country with lower pay.”

Derek Mackay, the Finance Minister, said the Scottish Government's "progressive tax system" would mean 70 per cent of people in Scotland were paying less tax this year than they did last year.

He added: “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.”