Super rich could pay less if taxes increase

Scotland’s richest people would lessen Holyrood’s tax take by changing how they are paid if the top rate rose above the rest of the UK’s, according to a financial expert.

Stephen Hay, a senior partner at accountancy firm RSM, said 9,000 people north of the border earn upwards of £200,000.

All of them pay the highest rate of tax, currently set at 45p for every pound earned above £150,000, and Mr Hay predicted many would stay in Scotland but use a tactic to pay less which would see cash go to the Treasury rather than Holyrood.

He told Sunday Politics Scotland: “If I was earning over £200,000 a year and I was faced with an extra 5p on tax, if I was in a position where I ran a small or medium enterprise or if I was in an owner-managed business and I was able to take a dividend, I would take a dividend.

“Dividend tax individually is going to be somewhat less than 50p, around about 38p, so you would expect a taxpayer in the higher rate band to take a dividend rather than pay that 5p on earnings.”

Mr Hay added: “I think the problem here isn’t about flight.

“If a dividend were to be taken instead of the 5p tax, dividend taxes are not devolved to Scotland…they are reserved at Westminster, which means the tax itself…would go to Westminster and wouldn’t come to Scotland anyway.”

First Minister Nicola Sturgeon, who has come under fire from Labour for refusing to increase the top rate, told the BBC’s Andrew Marr Show that she would raise the rate to 50p if she was confident of revenues increasing.

Meanwhile, the Reform Scotland thinktank has said the Scottish government should set up a new department to take responsibility for tax and welfare powers coming to Holyrood.

Accountancy expert Stephen Hay.