A record number of people are paying the highest rate of income tax, due to a “profound change to the tax system”, says former pensions minister Sir Steve Webb.
The proportion of people in the UK now paying the highest rates of tax has almost doubled in the past 20 years to reach one in six, up from one in 12 twenty years ago.
Over the past five years, 1.5 million more middle earners have been dragged into the top brackets, with HMRC figures showing that nearly 5 million people now pay either the higher (40 per cent) or additional (45 per cent) rate of income tax.
The 4.87 million Britons paying either higher or additional rates of tax are responsible for two-thirds of total income tax receipts.
HMRC estimates increasing the threshold for 40 per cent tax to £45,000 is likely to see a reduction in higher rate taxpayers. However, a move to increase the 12 per cent National Insurance Contribution limit to £45,000 will offset the reduction in tax receipts.
Sir Steve, now policy director at Royal London, which prepared the analysis, says: “Changes of this sort should be openly and honestly debated, not delivered by stealth, as tax thresholds are held down below the growth in earnings and more and more people find themselves as higher rate taxpayers.”
Whether you are in business as an individual or as a corporate, you will want to ensure that you pay no more tax than you are legally bound to do.
At Beavis Morgan, our diverse team of tax professionals are committed to ensuring that your tax reporting obligations are fully satisfied and that every opportunity to lawfully exploit tax savings is made known to you, restructuring your affairs in a tax effective and efficient way. In addition, we can look ahead to retirement and inheritance tax planning.
If you have any concerns relating to your tax return or wish to discuss your tax affairs in further detail, please contact your usual Beavis Morgan Partner.
Further reading: Soaring house prices highlights importance of IHT planning