The Ministry of Defence (MoD) has agreed to permanently reimburse 7,000 armed forces personnel who have been subject to higher tax rates in Scotland after an initial two year pilot. An annual payment will now be permanently provided to serving personnel earning £28,443 or more a year with an average annual payment of £850.
Mitigation of between £12 and £2,200 will be paid, with payments grossed up to take account of income tax and national insurance.
This would be provided regardless of where the soldiers are deployed or where their families are based, the MoD said.
It comes after concerns were raised by the department that the Scottish Government tax rates, which are higher than in England, could create low morale.
At a cost of £6.8 million a year, the MoD stressed it would “protect nearly two-thirds of all armed forces personnel liable for Scottish Income Tax and required to pay more in tax”.
They added it would also help with recruitment and retention of personnel, many of whom are in specialist engineering roles.
Among the locations where troops are stationed in Scotland include HM Naval Base Clyde, home to Britain’s nuclear deterrent and hunter-killer submarines and RAF Lossiemouth, home to half of the UK’s Typhoon force and submarine hunting maritime patrol aircraft.
Currently, in the present tax year, people in Scotland pay a tax rate of 20 percent between £14,585 and £25,158 and 21 percent up to £43,430.
A starter rate of 19 percent applies above £12,500 and below £14,585.
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Minister of State for Defence, Baroness Goldie, added: “Our Armed Forces serve the whole of the UK, so it is only right that they are treated equally and fairly wherever they are based.
“We want to reassure our brave troops that they won’t be penalised for simply doing their duty by having to pay higher taxes in a certain part of the UK and they will be properly compensated in their payslips each year.”
In response to the concerns, a Scottish Government spokesperson, said: “As a result of the Scottish Government’s progressive tax system, 56 percent of all Scottish taxpayers – including many armed forces personnel – will pay less income tax than they would if they lived elsewhere in the UK in 2020-21.
“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 – for instance, free prescriptions – that are not available elsewhere in the UK.”
MoD figures reveal that they spent nearly £1.76-billion with Scottish businesses in 2018/19 and an average of £320 expenditure per person each year.