Research and analysis

Estimating Scottish taxpayer behaviour in response to Scottish Income Tax changes introduced in 2018 to 2019

This report estimates the extent to which Scottish taxpayers changed their taxable income as a result of the Scottish Government’s introduction of the five-band system for Scottish Income Tax in tax year 2018 to 2019.

Documents

Details

This report estimates how the income of Scottish taxpayers has changed in response to the changes introduced to Scottish Income Tax by the Scottish Government for the 2018 to 2019 tax year. The approach compares Scottish taxpayers to a group of similar taxpayers from the rest of the UK (rUK) with regards to income tax declared between 2016 to 2017 and 2018 to 2019 when the policy was introduced. Since no change was introduced in rUK, any differences in income declared are assumed to be due to the introduction of the policy.

Results are broadly in line with the academic literature on behaviour in response to Income Tax changes. For taxpayers earning more than £150,000, we estimate that a 1% reduction in income retained after tax (MRR) leads to a reduction in income declared of between 0.52% to 0.77%. For those earning between £43,431 and £150,000, we estimate a reduction in income declared of between 0.12% and 0.46% for a 1% reduction in MRR. Finally, we found little to no evidence of any behavioural effect on taxpayers earning below £43,431.

Contact Details

If you would like to request a PDF print copy of this report or have any other enquiries about the analysis, please contact:

personaltax.statistics@hmrc.gov.uk

Knowledge, Analysis and Intelligence
HM Revenue and Customs
100 Parliament Street
LONDON
SW1A 2BQ

Any media enquiries should be directed to the HMRC Press Office contacts listed on the front page of this release.

Media contact: HMRC Press Office, news.desk@hmrc.gov.uk

Published 16 December 2021