Wealth Manager - the site for professional investment managers

Register free for our breaking news email alerts with analysis and cutting edge commentary from our award winning team. Registration only takes a minute.

Two million more sucked into 40p tax band

1 Comment
Two million more sucked into 40p tax band

The Institute of Fiscal Studies (IFS) has said two million more people will fall into the 40p income tax rate on the back of George Osborne’s Budget.

The chancellor resisted calls to raise the higher rate threshold, which currently stands at £41,450. Instead he chose to raise the tax-free personal allowance from £10,000 to £10,500.

This upset campaigners for the threshold to be increased, who point out that this level has risen by less than inflation, dragging more people into the 40p band.

Research from the IFS indicated higher rate taxpayers will be £546 a year worse off following the Budget.

David Phillips, senior research economist at the IFS, told the Daily Mail: ‘Our best estimate of how much it would cost to increase the higher-rate threshold to £47,845 is £3.6 billion a year.

‘This would then leave most higher-rate taxpayers £546.04 better off in 2015/16 than under the plans inherited from Labour.’

Mark Littlewood, director general of the Institute of Economic Affairs (IEA) think-tank, added: ‘Under George Osborne, nearly 1.5 million more taxpayers are paying this rate. This is an attack on aspiration and entrepreneurship.’

In the run-up to the Budget former Conservative chancellor Lord Lamont had urged Osborne to raise the 40p threshold, telling BBC’s Newsnight that ‘far too many’ people are paying the 40% tax.

Lawson described the increase in the 40p rate as a ‘dead end.’

"I think there ought to be a rise in the threshold of the 40%, maybe to £44,000 or something like that as a first step,’ he said.

‘Long-run, you can't go on and on not increasing this commensurate with earnings because you will end up with a situation where the 40% becomes the basic rate. That is complete nonsense.’

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play Boutique tapes: my business will never be sold

Boutique tapes: my business will never be sold

In the final part of our four part series we discuss consolidation and whether it's getting tougher for boutiques to survive.

Play Boutique tapes: are top managers better off at small firms?

Boutique tapes: are top managers better off at small firms?

In episode three of our series, boutique bosses discuss whether the best fund managers are more likely to thrive at smaller firms.

Play Boutique tapes: if you want a Ferrari, you have to pay for it

Boutique tapes: if you want a Ferrari, you have to pay for it

In the second part of our four-part series, boutique bosses are asked how they can justify the fees charged by active managers.

Read More
Your Business: Cover Star Club

Profile: how this boutique beat the big guns of wealth

Profile: how this boutique beat the big guns of wealth

This small west country offshoot of a local IFA scooped a 2018 Citywire award from beneath the noses of the national challengers

Wealth Manager on Twitter