THE SNP today said it would scrap council tax and replace it with an additional income tax of 3p in the pound.

Party leaders said their plans would mean 500,000 pensioners would no longer pay council tax, while taxpayers on low and middle incomes would benefit on average by £260 to £350 a year. The plans, which depend on the Nats winning a majority in the Holyrood elections in May, would see an SNP-led Scottish Executive introduce a system with no variation in rate, meaning all 32 councils raising funds through the same extra charge on income.

Council tax would first be frozen at 2007-08 levels until a local income tax is implemented in two or three years.

At that point, it would be scrapped and councils would get their money from the 3p in income tax, Householders would, however, continue to pay water and sewerage charges. These are currently collected by councils, but the SNP expects that under its scheme they would be collected directly by Scottish Water.

SNP deputy leader Nicola Sturgeon said: "This represents the biggest tax cut in a generation and is directed to particularly benefit pensioners and middle Scotland."

She said only the top tenth of income-earners would lose out. Ms Sturgeon said the cross-over point at which people would be worse off under the SNP was £33,000 for a single earner or £64,500 for a two-income couple.

The party admitted its plans would raise less money than through the existing system, so £450million of Executive funds would be transferred to councils to make up the shortfall.

Council tax bills have risen more than 60% in the last 10 years, but rises to take effect next month will be the lowest since the charge began in 1993. The average Band D bill will be under £1200.