MSPs will set the rate and thresholds for income tax in Scotland for the first time today, using new powers devolved in the wake of the independence referendum.

Under a deal struck between the minority SNP government and the Scottish Greens, Holyrood will approve the Scottish Rate Resolution for 2017-18, meanin higher earning Scots pay more income tax than those south of the border.

The threshold for the 40p rate of income tax will stay at £43,000 in Scotland, while the Tory government at Westminster raises it to £45,000 for the rest of the UK.

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The plan, which should raise around £108m, will affect around 10 per cent of Scottish taxpayers, and see them paying up to £400 more than English counterparts.

The SNP-Green deal also means an extra £160m for councils, although local authorities still face cuts of around £170m next year.

Finance Secretary Derek Mackay said: “Our Scottish social contract is the best deal on tax and public services anywhere in the UK.

"It means increased investment in the NHS and protection of public services that are free at the point of use – including free prescriptions, free personal care for the elderly, mitigation of the Bedroom Tax, free higher education, no business rates for 100,000 small businesses, additional investment in reducing the attainment gap and the doubling of free childcare.

Read more: Government pledges fresh help for businesses affected by 'crippling' rates rise

“These policies instil fairness and equality at the heart of our public services and also ensure that Scottish taxpayers get the best deal across the whole of the UK.”

Labour’s Alex Rowley said the Greens had “sold out” the poor with a deal that imposed £170m of cuts on schools and care for the elderly, without asking the richest to pay a 50p top rate.

He said: “Today the Scottish Parliament will make history by setting income tax rates and bands for the first time. But the SNP is refusing to use the new powers of the Scottish Parliament to invest in our valued public services.

“Propped-up by the Greens, whose pretence at being a progressive party is now blown, the SNP will plough on with cuts to local services such as local schools and community care while refusing to ask the richest 1 per cent to pay their fair share.

“In this historic vote, Scottish Labour will demand the SNP and the Greens do the right thing and invest in our public services.”

Read more: Government pledges fresh help for businesses affected by 'crippling' rates rise

Scottish LibDem leader Willie Rennie MSP said: “To grow a strong economy we need to grow people’s skills and invest in people. We reject the Conservative race to the bottom and the timidity and timorousness of this SNP/Green alliance budget.”