According to new data recently released by the Treasury, there were fewer people paying the 50% rate of income tax during 2012-13 than previous calculations had indicated. Although the number of people paying the higher rate of tax was forecast at 288,000, the actual figure was 273,000. The combined tax liabilities of those paying the 50% rate amounted to £38 billion, according to HMRC data – far less than the forecast of £39.3 billion.
The coalition party scrapped the 50% higher rate of tax, paid by those with income of more than £150,000. The Tories introduced a lower rate of tax for those with income above £150,000 at 45%. If the Labour party is
successful in the general election in May 2015, it has pledged to reintroduce the 50% higher rate of income tax. The Conservatives said that as data indicates there were fewer people paying the higher rate of tax than forecast, questions were raised about its return. A Treasury spokesman said:
“This is more evidence Labour’s chaotic gimmick raised no money but did drive away business and investment.”
According to the Labour party, those who were liable to pay the 50% rate of tax may have arranged to move their liability to the next year, 2013-14, so that the 45% rate of tax would be in force. A spokesperson for the Labour party said:
“As the Office for Budget Responsibility has said, high earners deferred billions of income and bonuses by a year in order to take advantage of the government’s top tax rate cut.”
The spokesman added that by announcing the reduced rate of tax a year in advance, the chancellor may have cost hundreds of millions of pounds for the taxpayer. The OBR confirmed that by announcing the scrapping of the 50% rate of tax, large numbers of high earners set about moving their income to the start of 2013-14 to avoid the old tax rate.
Plan ahead for 2015-16
There are ways to plan so that you minimise your tax bill in a legitimate and ethical manner. During the next tax year, married couples will be able to transfer personal allowances up to £1,060 to their partner, saving £212 a year as the rule only applies to basic rate taxpayers.
From 1st April 2015, the rate of Corporation Tax will be a single rate of 20%, although any profits that are moved artificially from the UK to a body within a country that has low tax rates will be automatically taxed at 25%.
If you have any questions about tax planning, contact us here at The Accountancy Partnership.
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