THE CHANCELLOR’s plans to scrap the 50p tax rate from 2013 could cost the Treasury billions of pounds of revenues as top earners delay income until the rate is reduced, accountants have warned.
Top earners are already seeking advice on how to defer income, bonuses and dividends until 2013 in anticipation of George Osborne’s Budget on Wednesday, the Telegraph reported.
Instead of deferring the measure, the Chancellor should reduce the top rate to 45p immediately – or risk losing tax revenues, incurring higher borrowing costs and compounding the 50p tax fiasco, the accountants warned.
Ian Gorham, chief executive of Hargreaves Lansdown, told the Telegraph: “The Chancellor needs to be decisive and any tax cuts should take effect immediately. Announcing a tax cut that only starts in April 2013 is almost certainly a bad idea.
“Many 50p tax payers could perfectly legally defer income – for example, decide not to take dividends, bonuses or salaries from their businesses – for a year to wait for the lower rate. The Chancellor would lose substantial tax revenue in 2012, which would need to be replaced by borrowing. The economy would also miss out on substantial spending and investment; 50p tax payers are big spenders and investors – so that could hurt the recovery.”
The Guardian reported that every taxpayer is to receive a personal statement spelling out exactly how much of their income is paid to the state and what it is being spent on.
Chancellor George Osborne is expected to use his Budget to announce plans to issue annual personal tax statements from 2014-15.
Specimen statements prepared by the Treasury show someone on £25,200 a year sees £5,702.12 of their income go to the exchequer in direct taxation.
As speculation grows that Chancellor George Osborne will on Wednesday announce that the 50p top rate of income tax will be scrapped next year, a Guardian poll found that two third of votes want to keep the top rate, which is charged on annual incomes above £150,000.
Sixty two percent of respondents would like to see new charges on costly homes, such as the mansion tax on £1m-plus properties that Liberal Democrat ministers had been pushing, but which is no longer expected to make it into the chancellor’s statement on Wednesday, the Guardian poll also found.
Making Tax Digital responses to the consultations expected in January 2017
Further corporation tax cuts and reliefs for cutting-edge tech businesses have been pledged by prime minister Theresa May, ahead of Wednesday’s Autumn Statement
The UK has not followed the global trend for reducing income tax over the past two decades
Friday Afternoon Live: HMRC complaints rise; Deloitte scoops big audits; and corporate reporting woes
HMRC receives highest number of complaints in seven years; Deloitte scoops BP and Centrica audits; and corporate reporting under the microscope in our latest Friday Afternoon Live broadcast