Scotland’s biggest teaching union has hit out at His Majesty’s Revenue and Customs (HMRC) and 16 local authorities over “scandalous” overpayment of tax by teachers in the wake of the pay dispute that ended in March 2023.
The EIS union said teachers in Scotland have been left out of pocket - potentially to the extent of tens of millions of pounds - as the result of an ongoing impasse.
The union points to tax changes that came into force in April 2023 and led to tens of thousands of teachers being overtaxed on back pay earned during the year 2022-2023. This was taxed at the higher 2023-2024 rate as a result of late payments by a significant number of Scottish local authorities.
‘Tens of millions’ in overpaid tax
The EIS said the financial loss for individual teachers varies, but generally runs to several hundred pounds of overpaid tax, with the total estimated at “tens of millions of pounds”.
A spokesperson for local government body Cosla said it had made clear to the EIS and other teaching unions involved in the dispute that if a pay deal was agreed after the cut-off dates for March payments, the “backpay would be taxed in the tax year 2023-24”.
However, the union today said that after seeking a resolution for “many months” - including frequent discussions with HMRC, Cosla and individual local authorities, as well as employing a firm of external tax advisers - it has escalated the matter by writing to the exchequer secretary to the Treasury, James Murray MP, calling on the UK government to resolve this issue “as a matter of urgency”.
In the letter to Mr Murray, EIS general secretary Andrea Bradley says the continuation of the situation “is neither fair nor acceptable”.
“From April 2023, thousands of EIS members, across 16 local authorities, have suffered significant financial disadvantage as a result of the delay in receiving backpay through no fault of their own - as the backpay paid in the tax year 2023-24 fell to be taxed at the Scottish higher rate of 42 per cent, rather than typically being taxed at 21 per cent if it had been paid in the preceding year, as it was for teachers in Scotland’s other 16 local authorities,” says Ms Bradley.
‘Scandalous detriments to teachers’
Her letter continues: “Since first being made aware of the issue in April 2023, the EIS has repeatedly attempted to seek a resolution. Thus far, however, neither HMRC nor the 16 local authorities in question seem willing to rectify what are scandalous detriments to thousands of Scottish teachers, the EIS believing the total amount that Scottish teachers are owed to run to tens of millions of pounds.”
The letter asks Mr Murray to “undertake the appropriate intervention towards resolving this matter for the thousands of Scottish teachers who have been negatively impacted”.
A Cosla spokesperson said payment of wages and taxation are local matters for individual Scottish councils as separate employers and each council has “its own unique payroll systems”.
The spokesperson continued: “Following the agreement of the 2022-2024 pay settlement on March 15 2023, some councils were unable to pay the uplift or backpay before the end of the tax year. Councils did not benefit financially by doing this - taxation goes directly to national government.
“We understand from briefings by the affected councils that taxation of pay was handled correctly and in line with HMRC guidance.”
An HMRC spokesperson said: “We have a legal duty to collect taxes to ensure fairness for all taxpayers.
“It is an employer’s duty to consider the tax implications when making payment awards to their employees and ensure PAYE [Pay As You Earn] is accounted for correctly.”
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