UK Government unveils plans for Scottish soldiers tax relief

The UK Government has pledged an annual lump sum for thousands of soldiers who faced having to pay more income tax because they are based in Scotland.

The Scottish Government unveiled plans for an increase in income tax last year, which will see anyone north of the Border earning more than £26,000 having to pay more than those in the rest of the UK.

The changes mean lower earners pay slightly less tax than those elsewhere in Britain, while middle and higher earners pay more.

The Ministry of Defence says that means around 8,000 serving troops could be paid up to £1,500 to compensate them - a total bill of around £4m in this financial year.

The scheme will mean "mitigation payments" of between £12 and £1,500 will be paid to armed forces personnel liable to pay Scottish Income Tax, regardless of where they are serving in the world.

Defence Secretary Gavin Williamson warned that Scotland risked being seen as a "less attractive place for military personnel to be posted to".

“It is completely wrong for the brave men and women of our Armed Forces to be punished for serving in Scotland by unfair raids on their pay packets by the Scottish government," he said.

“That's why we have taken this urgent action to ensure that our troops are treated equally and fairly.”

However Scotland's finance secretary Derek Mackay said the Edinburgh government’s “progressive” tax system meant 70 per cent of people in Scotland are paying less tax this year than last year for a given income.

He said: “We are fully committed to supporting the armed forces community and armed forces families in Scotland benefit from services not available elsewhere in the UK, such as free school meals, prescriptions and eye tests, and tuition fee and living cost support in higher education when they are ordinarily resident.

“It is disappointing that, despite making an offer to discuss the differential taxation of military personnel, the Scottish government has not been consulted on the proposal announced by the MoD.”