Friday, July 29, 2011

Tax tease of the week: Cutting the 50p top rate tax

First the Evening Standard suggested that the Chancellor was considering the removal of the 50p top rate tax band. Then London Mayor, Boris Johnson, renewed his campaign for the 50p rate to be cut, saying it made Britain more expensive for executives than most rival countries.

The Evening Standard reported that Boris claimed that the tax, which hits people earning £150,000 or more a year, was "not really raking in huge sums". Of course it isn't (yet) Boris. The first year to which it related was 2010/11 and much of the 50p rate tax payable for that year isn't due until 31 January 2012.

I'm no fan of the 50p top rate and have heard many business people reference it as a reason for moving overseas and for foreign executives refusing to come to London. With the addition of the 1% surcharge on high earnings the effect is that those high earners get to keep less than half of their bonuses etc. Psychologically this is bound to be demotivating.

BUT, as yet no one can say for certain how much additional tax will be collected re the first year in which the 50p rate operated.

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