MINISTERS are considering freezing the threshold at which people start paying the higher rate of income tax in a bid to close a new loophole which would see some well-paid workers pay less tax next year.

The move could generate an extra £90 million and is being looked at as the Scottish Government seek to get the support of another party, most likely the Scottish Greens, to ensure its Budget is passed in Holyrood.

The anomaly emerged in a briefing carried out by Scottish Parliament researchers following the publication of Finance Secretary Derek Mackay’s Budget last month which created new rates and bands including a new starter rate. But it is at odds with the Scottish Government’s guiding principle of having a progressive system in which the better off pay more.

Researchers calculated that as a result of the changes, and the rise in the £43,000 threshold at which people start to pay the higher rate of income tax, people earning between £43,525 and £58,500 would pay less tax next year. Around 346,000 Scots are currently higher rate tax payers.

It explained: “The proposals include an increase to the personal allowance (which is set by the UK Government) and an increase in the higher rate threshold (from £43,000 in 2017-18). The proposals mean that all those earning less than £33,000 will pay less income tax in 2018-19 than they did in 2017-18.

“However, the increase in the higher rate threshold also means that those earning between £43,525 and £58,500 will see a reduction in their income tax in 2018-19.”

But freezing the higher rate threshold (HRT) would close this loophole and raise a further £90m. The issue was set out in the Scottish Government’s discussion paper on income tax which was published last year and which continues to inform the Budget plans.

It said: “A further variation, which could be applied to any of the approaches, would be not to increase the HRT by inflation (an inflationary increase is currently assumed) but either to freeze the HRT in cash terms or to vary it on a scale between a cash freeze and an inflationary increase.

“This latter variation would increase the revenue raised by up to £90 million.”

The issue also came up on Wednesday this week at Holyrood’s finance committee when MSPs quizzed Mackay.

Tory MSP Adam Tomkins pressed Mackay: “A few moments ago, you said that you are using the Scottish Parliament’s tax-raising powers in a ‘fair and balanced way’. According to the Scottish Parliament Information Centre’s analysis of the proposals, those earning between £33,000 and £43,000 will pay more tax next year than this year, but those earning more than £43,000 and up to £58,000 will pay less tax next year than this year. How is that fair and balanced?”

Mackay replied: “With some of the policy, we may not have set out to have that particular consequence. The point relates to the decision last year to freeze the higher rate threshold. We do not propose to do that in the proposals this year; we propose to increase it in line with inflation.

“That creates what I have admitted is an anomalous situation ... creates that anomaly ... an unintended consequence for a particular bracket.”

An SNP insider later told the National: “It makes sense to freeze that threshold again. It would raise an additional £90m and close this loophole.”

Mackay told MSPs the income tax plans he had set out in his draft Budget for 2018-19 would make Scotland the “fairest taxed part of the UK” and would offer the “best deal” for most earners.