Wealth manager and Financial Planner Rathbones - a leading employer in Scotland - has warned that the growing complexity of Scotland’s income tax system risks damaging the Scottish economy and putting off clients relocating north of the border.
Rathbones, which describes itself as one of the largest wealth and asset management firms in Scotland, says the income tax system north of the border is too complex compared to England and does not encourage investment or people relocating to Scotland.
Rathbones wants Anas Sarwar - recently appointed by new PM Andy Burnham as UK Minister of State for Trade - to use his Westminster role to champion policies that support Scottish "growth, entrepreneurship and competitiveness."
Rathbones wants a "renewed focus", it says, on Scotland’s long-term economic competitiveness to attract investment, skilled professionals and entrepreneurs.
Rathbones employs more than 400 people across its two offices in Scotland. The firm also acts for clients across Scotland, including professionals in key sectors such as energy, law and accounting, business owners, charities and IFAs.
The wealth manager highlighted Scotland’s devolved income tax regime as "ripe for review." Scotland has six income tax bands, compared with three in England and Wales. Higher earners in Scotland pay 42% income tax from £43,663, compared to 40% elsewhere in the UK, while top earners face up to 48% income tax, according to Rathbones analysis.
Gordon Lawrie, head of Rathbones’ Edinburgh office, said: “Having a senior Scottish Labour figure at the heart of government in Westminster presents an opportunity to strengthen Scotland’s voice on the factors that will shape its long-term competitiveness. Across Scotland, we act for people in leading businesses and world-class universities and see the challenges they face in attracting and retaining skilled senior people.”
“There is a clear tension between Scotland’s devolved income tax regime and wider UK growth ambitions. The current system is significantly more complex than elsewhere in the UK and places a materially higher burden on many professionals, business owners and senior executives. Our advisers see individuals who work in Edinburgh but choose, for tax reasons, to live south of the border and commute – this is not good for Scotland.”
Adam Drummond, head of Rathbones’ Glasgow office, said: “The income tax regime may be a deliberate policy choice, but it has consequences. A more punitive and complex tax system risks weakening Scotland’s attractiveness as a destination for investment, entrepreneurship and skilled workers at a time when growth is the priority.
“Ensuring Scotland remains an attractive place to live, work and build a business should be central to the UK’s growth agenda. A simpler, more competitive system would help Scotland benefit fully from the talent and investment it needs.”