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15 Aug 2011
THE TOP TAX bracket is 'pointless' and adds little to Treasury coffers, chancellor of the exchequer George Osborne (pictured) has claimed.
Currently set at 50p, Osborne warned that the tax on top earners is "uncompetitive", and "not a lasting rate", The Independent reported.
Further reading
He argued that heavy taxes will drive business leaders and wealth creators abroad, saying: "There is not much point in having taxes that are very economically inefficient."
The tariff was put in place a year ago and Osborne asked: "what is it raising?" He added: "People frankly can move."
HM Revenue & Customs is currently reviewing the tax bracket to see how much it raises, though analysts have already predicted it will not be a big earner. The results are due next January.
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Briefings
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Personal allowances
The gradual removal of personal allowances for those earning between £100,000 and £115,000 results in an effective tax/NI rate of 62% for earnings within this band, whereas earnings between £115,000 and £150,000 only incur 42%, and over £150,000 incur 52%. The retention of only 38% of income between £100,000 and £115,000 is a significant disincentive to earn within this band and is likely to result in actions to suppress income, for example through salary sacrifice and higher pension contribution arrangements, or even part time working. It would be fairer if those who earn the most pay either the same or a higher marginal rate than those earning less. The Government should consider increasing the income tax rate to 45% for earnings over £100,000 and reinstating personal allowances for everyone.
Posted by: Tony Wilson, 15 Aug 2011 | 12:32