Scots earning more than £27,850 already pay more in income tax than workers elsewhere in the UK and First Minister Humza Yousaf has recently suggested the creation of a new income tax band of 44% for people earning between £75,000 and £125,140, which would equate to an effective tax rate of 68% on some earnings due to the impact of the loss of personal allowances.

Middle and high earners also saw a 1p rise in what they pay in every pound from the start of this tax year because of changes made in the Scottish budget.

The higher Scottish rate is now 42p in the pound and is applicable on earnings between £43,662 and £125,140. The Scottish top rate, which is now 47p, begins from £125,140, while a Scot earning about £50,000 pays approximately £1,500 more in income tax than if they lived in England.

Catherine McManus, partner and head of tax at Wylie & Bisset, said that while there are social reasons for the First Minister to consider making these changes, the continuing widening of the gap of different levels of taxation in Scotland and the rest of the UK could make cross-border relocation and recruitment problematic for Scottish employers.

Ms McManus said: “The gap in tax revenues is not new, having been with us for several years. However, this continued widening and proposals to do more has the potential to create recruitment issues in Scotland.

“These could partly be addressed through the adoption of a creative approach to employment packages, such as a flexi-benefit culture and offering up tax efficient employee incentives to recruit and retain key employees. More may take advantage of salary sacrifice offerings for example on pensions or offer up more flexible time and holiday solutions.

“Share option schemes are another possibility for Scottish employers to consider offsetting the challenges of recruiting and retaining employees from the rest of the UK should the tax gap between Scotland and the rest of the UK continue to widen.”