DEREK Mackay has been urged to close a loophole in his draft Budget that could see some higher rate taxpayers get a tax cut next year.

Labour said it was unthinkable for the Finance Secretary to give the better off a tax break while funding for lifeline services fell almost £700m in real terms.

The party cited research from Holyrood’s independent information centre which showed those earning between £43,525 and £58,500 are set to enjoy a small tax decrease next year.

This is despite the Scottish Government’s aim to create a more progressive tax system under which those earning over £33,000 pay more tax in 2018/19 than this year.

The anomaly is a result of Mr Mackay introducing new bands of 19p and 21p and increasing the threshold for the higher rate (now 41p) from £43,000 to £44,273.

Holyrood researchers said people earning £44,000, £44,275 and £55,000 would be better off by £90, £142 and £35 respectively as a consequence.

Scottish Labour finance spokesman James Kelly said: “Derek Mackay’s sham budget is rapidly unravelling. “The Finance Secretary has chosen to effectively cut lifeline services by £700m, while giving a tax break to those earning more than double the average salary.

“This SNP budget simply tinkers around the edges with tax rather than delivering the real change Scotland needs.”

The Scottish Government said it had increased the higher rate threshold by inflation to ensure those who were at the top of the basic rate did not become higher rate taxpayers.

“Along with the changes to the personal allowance that results in an anomaly where a small number of people gain at around £44,000,” a spokesman said.

“The amount they gain has been reduced by around £200 as a result of the introduction of the intermediate rate, with the higher rate of 41p increasing tax liability further.”

Mr Mackay added: “Our new, fairer, income tax policy will protect the 70 per cent of taxpayers who earn less than £33,000 a year and ensure that over half of taxpayers will pay slightly less in Scotland next year than they would in the rest of the UK, protecting low incomes and supporting the economy.

“These measures combined with our investment in the NHS, the economy, infrastructure, education and essential public services ensure that in the year ahead Scotland will be the fairest taxed part of the UK, providing the best deal for taxpayers.”

The Scottish TUC criticised the government’s priorities in the Budget.

Assistant General Secretary Helen Martin highlighted a Scottish Fiscal Commission finding that £96m of the £164m extra being raised in income tax would go on business rate cuts.

She tweeted: “Rises in income tax primarily paying for cuts in tax for business. Where is the commitment to public services?”