Some individuals in Scotland are choosing to reside in England and commute across the border to avoid what has been described as 'punitive' Scottish National Party (SNP) taxes, according to a report by wealth and asset management group Rathbones.
This trend of cross-border commuting is reportedly triggered by Nationalist reforms that have positioned Scotland as the most heavily taxed part of the United Kingdom. Experts suggest these higher tax levies negatively impact businesses, compelling them to offer enhanced pay and benefits to senior executives to offset the increased tax burden imposed by the Scottish government.
Scottish Conservative finance spokesman Craig Hoy stated that the SNP has created a tax system so complex and punitive that skilled professionals are opting to live in England rather than Scotland. He argued that the SNP's focus on making Scotland the highest-taxed region in the UK is stifling economic growth, eroding competitiveness, and hindering the nation's economy.
Rathbones noted that the appointment of former Scottish Labour leader Anas Sarwar to a new UK Government role under Andy Burnham presents an opportunity to elevate investment and business in Scotland on the national agenda.
Gordon Lawrie, head of Rathbones' Edinburgh office, observed that their advisors encounter individuals who work in Edinburgh but choose to live south of the border and commute for tax reasons, a situation he deems detrimental to Scotland. He highlighted a 'clear tension between Scotland’s devolved income tax regime and wider UK growth ambitions,' adding that the current system is significantly more complex and places a 'materially higher burden on many professionals, business owners and senior executives' compared to the rest of the UK.
In Scotland, individuals earning above approximately £30,300 pay more in income tax than their counterparts in England. The English tax system features a 20% rate on earnings above £12,571, rising to 40% above £50,271 and 45% above £125,140. Scotland's income tax system, however, includes a starter rate of 19% on earnings up to £15,397, a basic rate of 20% up to £27,491, an intermediate rate of 21% up to £43,662, a higher rate of 42% up to £75,000, an advanced rate of 45% up to £125,140, and a top rate of 48% for earnings above £125,140.
Rathbones suggests this 'complexity and divergence' could become a barrier for employers seeking to recruit or relocate talent to Scotland. The firm recommended that the new UK administration prioritize policies that enhance competitiveness, encourage investment, and support the attraction and retention of skilled individuals.
Adam Drummond, head of Rathbones’ Glasgow office, emphasized that ensuring Scotland remains an attractive place to live, work, and conduct business should be a core component of the UK's growth strategy. He believes a simpler, more competitive tax system would enable Scotland to fully leverage the talent and investment it requires.
Sandy Begbie, chief executive of Scottish Financial Enterprise, indicated that the differing tax regimes are already 'driving behavior change,' citing a law firm where several partners work in Scotland but reside across the border.
In response, the Scottish Government stated that since the introduction of Scottish Income Tax in 2017-18, HMRC has confirmed that more individuals with taxable income have moved to Scotland than have left.