Thousands of troops who could have been adversely affected by the Scottish government’s tax rises will continue to be protected in the next financial year, the Ministry of Defence (MOD) has said.
Last year, the Scottish government brought in a new banding system for taxes north of the border, with many seeing their bills rise as a result.
The MOD's financial mitigation aimed to ensure that more than 8,000 personnel would not be adversely affected.
It followed concerns that income tax changes could have resulted in Scotland becoming a less attractive place for military personnel to be posted.
The renewed protection will cover the financial year 2019/20, and will protect nearly two-thirds of all Armed Forces personnel liable for Scottish Income Tax.
It also aims to help with recruitment and retention, particularly as many of those affected are personnel with specialist skills such as aircraft and submarine engineers.
The last Scottish government budget in December 2018 confirmed further divergence between Scottish and UK tax rates, and as a result, the financial compensation cap for Armed Forces personnel liable for Scottish tax has risen from £1,500 to £2,200.
An annual payment is to compensate all troops, to ensure they receive similar take-home pay regardless of where they are deployed or where their families are based.
The MOD sets the remuneration and allowances package for its personnel.
According to the Scottish government, overall 99% of all Scottish income taxpayers - those earning less than around £124,000 - will pay less tax next year than they do in 2018/19, for a given income.
Furthermore, 55% of Scottish income taxpayers - earning up to around £26,990 - will pay less income tax than people earning the same and living in the rest of the UK.
Defence Secretary Gavin Williamson said: “Our Armed Forces are deployed where they are most needed, and so it is wrong that personnel are penalised or left hundreds of pounds out of pocket because of decisions taken by the Scottish government.
“As a result of this decision, I am extending the financial mitigation package for serving personnel in Scotland for another tax year.
"This demonstrates our commitment to treating all personnel both equally and fairly, wherever they serve.”
Scotland's Finance Secretary Derek Mackay said: “As a result of the Scottish government’s progressive tax system most Scottish income taxpayers – including thousands of Armed Forces personnel – will pay less income tax than people earning the same and living in the rest of the UK.
“We are fully committed to supporting the Armed Forces community. Scotland continues to be an attractive place to live, work and do business with Armed Forces families in Scotland able to access many services and benefits not available elsewhere in the UK.
“It is disappointing that, despite Scottish ministers making an offer last year to discuss the differential taxation of military personnel, the MOD has continued to fail to consult the Scottish government on this issue.”
Scotland's role in UK defence includes supporting over 10,000 industry jobs, and is renowned for building the world’s finest warships - including the UK’s new aircraft carriers and the Royal Navy’s state-of-art Type-26 frigates.
It also benefits from £1.6 billion of defence investment in local industry and an average of £290 expenditure per person each year.
Scotland is home to national defence capabilities including HM Naval Base Clyde, home to Britain’s nuclear deterrent and hunter-killer submarines, and RAF Lossiemouth, which defends the UK’s airspace with its three Typhoon combat aircraft squadrons and 51st Infantry Brigade.