A Tes Scotland investigation has revealed that at least half of Scottish councils plan to tax teacher backpay for 2022-23 at 2023-24 tax rates, which will reduce the pay packets of many teachers.
The 16 councils say the finalisation of the teacher pay deal - which includes a backdated uplift of 7 per cent for 2022-23 - came too late to be included in March pay packets.
However, 13 councils told Tes Scotland they would be paying teachers their backdated pay in the 2022-23 tax year - while a further two local authorities said they were also hopeful of doing so.
One council had yet to confirm its positions at the time of publication.
The councils that plan to pay teachers their backdated pay before the end of the current tax year (2022-23) include: Angus, Clackmannanshire, Dumfries and Galloway, Dundee, East Ayrshire, Moray, North Ayrshire, North Lanarkshire, Orkney, Scottish Borders, South Ayrshire, Stirling and West Dunbartonshire
The councils aiming to do so include Western Isles and Renfrewshire.
The councils that say they are unable to process the pay uplift and backpay this tax year include: Aberdeenshire, Argyll and Bute; Edinburgh, East Dunbartonshire, East Lothian, East Renfrewshire, Falkirk, Fife, Glasgow, Highland, Inverclyde, Midlothian, Perth and Kinross, Shetland, South Lanarkshire and West Lothian.
The council yet to confirm its position was Aberdeen City.
Pay deal: some teachers hit by higher tax
The Scottish teacher pay deal settled earlier this month will result in what the EIS teaching union has said is a 14.6 per cent increase in pay for most teachers by January 2024; this accumulates in three stages over the course of 28 months, starting with a backdated 7 per cent pay increase for 2022-23.
However, the Scottish higher rate of tax is due to increase next year, going from 41 per cent to 42 per cent for those earning over £43,663.
This means that teachers at the same point on the pay scale may have more tax deducted from their backpay than others because of the payroll arrangements operated by the local authority they are employed by.
Teachers who are going to be hit in the pocket say it is “fundamentally wrong” that they will receive hundreds of pounds less in backpay than someone in exactly the same position but who lives elsewhere.
The EIS, meanwhile, has written to councils urging them “to do all within their power to prevent any such inequality in the payment of backpay”.
However, local authorities say the EIS and other teaching unions were aware of this risk.
Highland Council says it will be unable to process the teachers’ new rate and backpay in the current tax year because “the finalisation of the agreement came too late to be included in the March salary, as teaching unions were previously advised both locally and nationally by [local authorities’ body] Cosla”.
A Highland Council spokesperson added that: “Tax is applied at the time an employee receives the payment, and therefore payments made after the end of tax year 2022-23 will be subject to tax on all earnings received in 2023-24. The council is bound by HMRC regulations and unable to deviate from this.”
An Aberdeenshire Council spokesperson also said the deal had come too late for the new pay rates and for backpay to be included in March pay cheques.
The spokesperson added: “There may be other local authority areas that have different payroll schedules and are able to process payments for March, where the 2022-23 rate will apply.
“Whilst it is regrettable that there will be an inconsistency across different councils, EIS did advise its members that there could be challenges for local authorities to pay backpay in time for implementation in the 2022-23 tax year.”
Several local authorities said that teachers should contact HMRC directly if they believe they have overpaid tax.
After the 14 February teacher pay offer was rejected outright by the EIS, Cosla’s resources spokesperson, Katie Hagmann, said teachers would now “not see a penny of this pay increase in 22-23” and “any additional pay will be subject to higher tax in 23-24, meaning less money in the pockets of teachers”.
In a “frequently asked questions” section on the pay offer on the EIS website, question 13 asks: “Should the proposed pay award be implemented, what effect will this have on my tax?”
The response states that the final date of the pay settlement means that “there could be challenges for local authorities to pay backpay in time for implementation in the 2022-23 tax year”. It adds: “This could result in some payment of backpay occurring in the 2023-24 tax year.”
The EIS advises that teachers “should contact HMRC if you believe your tax will be overpaid compared to having received the payment in the 2022-23 tax year”.
