Permanent protection from higher tax for military personnel in Scotland

Scottish mountain image

Thousands of British Armed Forces personnel will continue to be protected from income tax rises passed by Holyrood.

More than 7,000 personnel left out of pocket by higher taxes in Scotland will again be protected in the next financial year.

An annual payment will continue to be provided to serving personnel earning £28,443 or more a year to make sure that they, regardless of where they are deployed or where their families are based, will pay the same income tax. The average payment made will be £850.

It follows a 2018 promise by defence that Scottish government tax hikes would not adversely affect serving personnel, amid concerns they could create low morale and result in Scotland becoming a less attractive place for military personnel to be posted.

The renewed measures, which will now apply indefinitely rather than being renewed annually, will protect nearly two thirds of all armed forces personnel liable for Scottish Income Tax and required to pay more in tax. They will also help with recruitment and retention, particularly as many of those affected are personnel with specialist skills, such as aircraft and submarine engineers.

By guaranteeing a permanent Scottish Income Tax Mitigation, the Ministry of Defence (MOD) is providing ongoing certainty to our armed forces. The minimum amount of mitigation that will be paid will remain at £12 and the maximum cap will be reviewed annually following the Scottish Government’s announcement on tax rates and thresholds.

The financial compensation cap for armed forces personnel liable for Scottish Income Tax in Tax Year 2020/21 will remain at £2,200 following the last Scottish Government budget in March 2020. The estimated cost to the MOD is expected to be £6.8-million in financial year 2021/22.

The financial mitigation measures will:

  • be payable to all regular personnel who pay Scottish Income Tax, regardless of where in the world they are serving. Mitigation of between £12 and £2,200 will be paid, with payments grossed up to take account of income tax and national insurance applied when they are made
  • cover personnel for tax year 2020/21, with a single payment made retrospectively in June 2021

Scotland is home to some of the most important UK Defence capabilities including RAF Lossiemouth, home to half of the UK’s Typhoon force.

More information

From: Ministry of Defence and Office of the Secretary of State for Scotland

Contains public sector information licensed under the Open Government Licence v3.0.

Image by misterfarmer from Pixabay

Back to news