Higher rates of top income tax in Scotland are driving high earners to consider commuting to well paid jobs from England, according to Rathbones Group, the largest wealth management firm in both the UK and Scotland.

In a new analysis, Rathbones shows top earners could save more than £46,000 in income tax over five years by moving to England and commuting to their jobs, instead of remaining Scottish taxpayers.

The cross-border commuter trend is emerging through conversations with Rathbones clients and prospective clients who work in Scotland but are increasingly questioning where they should live as the gap between Scottish and rest-of-UK income tax rates continues to widen.

Rathbones’ analysis shows that someone earning £250,000 could pay around £8,900 less income tax in the first year alone if subject to the income tax rates that apply in England rather than Scotland. Assuming salary growth of 2% a year, the cumulative difference could exceed £46,000 over five years.

The findings reflect the Scotland’s devolved income tax system. Scotland currently operates six income tax rates above the Personal Allowance, ranging from 19% to 48%, while England, Northern Ireland and Wales have three main rates of 20%, 40% and 45%.

Rathbones recently warned that Scotland’s divergent income tax regime could hamper efforts to attract investment, entrepreneurs and skilled workers.

Gordon Lawrie, Head of Rathbones’ Edinburgh office, says:

“For higher earners, the tax map of the UK is becoming harder to ignore. A worker can live on one side of the border, work on the other and, depending on their tax residence, face a materially different income-tax bill."

“High earners ask us a very simple question, namely can I save tax if I live in England and continue to work in Scotland? Someone earning £250,000, the difference could exceed £46,000 over five years, which is enough to make tax part of the conversation alongside housing, commuting and wider lifestyle considerations.”

For someone earning £150,000, the potential difference is around £5,900 in the first year and more than £30,500 over five years. The potential five-year income tax difference ranges from approximately £12,300 for someone earning £80,000 to more than £46,000 for someone earning £250,000.

The analysis also highlights the significant impact of the Personal Allowance taper. Between £100,000 and £125,140, taxpayers effectively face a marginal income tax rate of 60% in England. For Scottish taxpayers paying the 45% Advanced Rate, the equivalent effective marginal rate can rise to 67.5% while the Personal Allowance is being withdrawn.

Rathbones, which has offices in Glasgow and Edinburgh, argues that policymakers should place greater emphasis on Scotland’s long-term competitiveness through a simpler and more competitive tax system, in turn strengthening the country’s appeal as a place to live, work and do business.

Adam Drummond, Head of Rathbones’ Glasgow office, says:

“There is also a broader economic question for Scotland. If tax policy starts driving higher earners elsewhere policymakers should consider what that means for Scotland’s long-term competitiveness, its ability to retain and attract investment and entrepreneurs to drive growth.”