Treasury
Treasury revises revenue from 50% rate
02 Feb 2010, Gavin Hinks, AccountancyAge
http://www.accountancyage.com/aa/news/1808610/treasury-revises-revenue-rate
The Treasury is expecting to take much less from the new 50% rate of income tax than it first estimated, according to Treasury minister Lord Myners.
Speaking in the House of Lords yesterday the financial services secretary said the rate would still be beneficial in terms revenues, but suggested the full extent to which tax payers would avoid the new rate had not been correctly gauged in advance.
He said the Treasury had: "made adjustments for the behavioural consequences of a new higher rate of taxation and accordingly have significantly reduced the anticipated tax take.
He added: "We still believe that it will be beneficial." He then said the precision of any estimates "depends on the rates of income of the individual people who chose to go overseas."
Lord Myners said: "It is clear to me that very small numbers of people appear to have gone overseas as a consequence of the increase in the highest rate of taxation. I remind the House that it applies to less than 2 per cent of the working population."
Taxpayers are using a number ofstrategies to avoid the tax. One involves leaving income within a company to be drawn down later. Others include receiving pay rises to compensate for the increased rate, moving overseas of chanelling money through charitable donations.
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Visitor comments
Wasn't it blindingly obvious...
...that people would take steps to avoid paying the 50% rate? Didn't the London congestion charge raise less income than expected when it was first introduced, as volumes of drivers coming into London fell?
I can't believe that anyone thinking up these tax rises doesn't consider that people will take steps to avoid the extra tax.
I'm on the threshold of total income at risk of being charged at the marginal rate of 60% next year when personal allowances start to be withdrawn for those earning over £100k and I shall be looking to (legally) minimise my tax by putting more money in tax free investments, increase my pension contributions whilst I still can, ensure I gift aid all charitable donations etc.
Posted by: Helen , 02 Feb 2010 | 00:00
50% Tax Rate - Waste of Talent
Instead of taxing those who are constantly making most of the money for the country, be they 2% - the Co makes money so pays more Corporation tax, etc.
It would be better to raise the VAT Rate for Luxury Goods - any item costing more than £10k could be VAT'd at 25% so you do not affect those working hard to earn a living & not getting much in return, health poor, education poor, police & safety - poor so they end up paying for all this & keeping teachers in jobs!!??
Posted by: sienna , 02 Feb 2010 | 00:00
Quel surprise!!!
I assume that Lord Myners lives in the same world as the rest of us,but perhaps does not actually understand the subject of tax.Or perhaps he believes everything the Treasury "experts" tel him,in which case he is in Cloud Cuckoo Land
Posted by: E G Bellamy , 03 Feb 2010 | 00:00
Better off being idle.
Re: Helen's comment below on being at the cusp of the 62% tax rate (don't forget the 2% NIC). My solution is to buy more holiday under our fleixible benefits package. In effect I am taking unpaid leave at a cost to me of 38% of salary. What a bizarre tax system that encourages me not to work.
Posted by: Winston Smith , 08 Feb 2010 | 00:00
Different rates of tax ignore basic reality
Is it really so hard to see that everyone paying exactly the same PERCENTAGE tax on income would mean the higher earners pay more and the lower earners pay less. I just do not get why anyone thinks different rtes for different people is acceptable at all.
Surely it is time to stop all this nonsense and introduce one rate of tax, and call a spade a spade anddelete the notional separation between "tax" and "national insurance".
How about no NIC and simply, say, 30% for all?
Posted by: Paul Winston , 22 Feb 2010 | 00:00