Budget changes, which will put many more people into the 40p rate bracket have skipped commentary on the Budget with the media obsession with cutting the 50p rate, pensioners and the pasty tax, according to Johnathan Dudley, Midlands Managing Partner of national audit, tax & advisory firm Crowe Clark Whitehill.
He said: “Penalties on relatively modest earners and wealth creators have skipped comment in the rush to headline grab.
“It is estimated that 1.3 million people will be forced into the higher 40p rate of income tax alone over the next few years.
“The Institute for Fiscal Studies has said that the number of higher-rate taxpayers could hit five million for the first time in 2014 because of the Chancellor’s decision to reduce the threshold for the 40 per cent rate to £41,450 from April 2013.
“The percentage of workers paying the higher rate will reach 15 per cent next year as a result, compared with five per cent in the 1980s.
“The start effective 60p band stays at £100,000 but with the extension of personal allowances, the band expands over the next two years by £3,470.
“What we are seeing is a creeping towards a more progressive tax regime, contrary to what the media are saying. Surely this is a bigger story than the 5p reduction in the top rate changed on top earners, many of whom have avoided the tax anyway!
“Surely there is a case for changing a system that taxes at 20 per cent, then 40 per cent then 60 per cent, back down to 40 per cent and only then to 45/50 per cent.”
