Last year, we reported on the MoD’s resolution to the problem of military personnel based in Scotland paying more income tax than their counterparts living in other parts of the UK. This is because the devolved Scottish Government now has the power to set its own income tax bands and rates. The MoD decided to recompense those members of the Armed Forces who financially lose out for that tax year.
What about for the new tax year?
The Scottish Government set its new Budget in December, and the gap between Scottish income tax bands and the rest of the UK has grown. It was confirmed during Prime Minister’s Questions that those Armed Forces personnel based in Scotland would continue to get the difference repaid to them at the end of the tax year, as a lump sum. The maximum amount payable has risen in line with the changes made by the Scottish government to their income tax system.
What are the figures involved?
There are 7,000 British military personnel based in Scotland. The total cost of supplementing their wages with the difference between the Scottish income tax rates and the rest of the UK’s income tax rates will be around £6m of the MoD’s budget. Individual members of the armed forces will receive a repayment amount between £12 and £2,200. This is an increase in the maximum amount of £700, from the £1,500 cap on the previous year.
Why do they need to get any compensation?
As reported by the BBC, Gavin Williamson, the Defence Secretary, said: “Our Armed Forces are deployed where they are most needed and so it is wrong that personnel are penalised or left hundreds of pounds out of pocket because of decisions taken by the Scottish government. As a result of this decision, I am extending the financial mitigation package for serving personnel in Scotland for another tax year. This demonstrates our commitment to treating all personnel both equally and fairly, wherever they serve.”
But some would argue that they are getting the benefits of what the extra income tax pays for in Scotland, without paying for it. They can access all the benefits and services that the additional income tax pays for, that aren’t available to their colleagues who live in the other countries of the UK. There doesn’t seem to be any consultation on this important matter between the MoD, the UK government and the Scottish government so far.
Derek Mackay, Scotland’s Finance Secretary said: “As a result of the Scottish government’s progressive tax system most Scottish income tax payers – including thousands of armed forces personnel – will pay less income tax than people earning the same and living in the rest of the UK. We are fully committed to supporting the armed forces community. Scotland continues to be an attractive place to live, work and do business with armed forces families in Scotland able to access many services and benefits not available elsewhere in the UK. It is disappointing that, despite Scottish Ministers making an offer last year to discuss the differential taxation of military personnel, the MoD has continued to fail to consult the Scottish Government on this issue.”
A discussion has still not taken place between the two leading agencies involved. It is certainly an interesting issue of equality. If you are the same rank, in the same job, should you be paid the same amount? Most of us would say, “Yes, of course, that’s only fair.” But how does access to additional benefits and services fit into this equation? Perhaps it would be a good idea for both parties to pencil in a discussion around this matter, sometime before the next tax year begins.