Tuesday, March 23, 2010

Aspirational 50% top rate taxpayers

Regardless of any surprises in the Chancellor's last(?) Budget tomorrow, we know, from the 2009 Budget announcement that the top rate of tax moves up to 50% from 6 April 2010.

The 50% rate applies to taxable income over £150,000 in 2010/11. (That's some six times the average national wage). The 50% rate will never affect anyone who's income is unlikely to reach this figure. But accountants have many clients who are still worried about it, resent it and want to know how they can avoid having to pay it. These are the "Aspirational 50% top rate taxpayers". They anticipate, hope or dream of earning more than £150,000.

This all sits rather peculiarly with Gordon Brown's claim that Labour is "the party of aspiration" as none of those who aspire to earn more than £150,000 are really aspiring to pay 50% tax. On the contrary they want to know what they need to do to avoid having to pay it if they achieve their income ambitions. Or maybe their concern is based on a misunderstanding. Perhaps they assume that the 50% rate replaces the 40% rate which itself hits only 10% of all taxpayers. The Chancellor estimates that just 2% of the population will be affected by the 50% rate.

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