Speaking on the BBC Radio 4’s Today programme this week, Chancellor George Osborne gave his clearest indication yet that he wants to abolish the 50% top tax rate. Such a move is likely to come into force from April 2012 and would be seen as a way to help kick-start growth in the sluggish UK economy.
In the radio interview the Chancellor described the 50% rate as ‘uncompetitive’, he pointed out that it was introduced by Alistair Darling and said that he had always considered it a temporary measure and ‘not a lasting tax rate for Britain’. He has asked HMRC to assess what revenues are actually being raised from the 50% rate ‘to see whether its raising money or not’.
This move was to be expected eventually. Its just a surprise that the Chancellor is keen to ditch the 50% rate so soon. Politically he would have liked to have kept this tax giveaway up his sleeve until the end of this Parliament to serve as a pre-election ‘bribe’.
If the 50% top rate of tax is abolished from April 2012, it will encourage people who otherwise would have total income above £150k in the current tax year into the following action where possible:
• Delay receipt of earnings or bonuses until after 5 April 2012;
• Postpone taking dividends until after 5 April 2012;
• Put-off the exercise of options, which would give rise to an income tax charge, until after 5 April 2012;
• Reschedule the receipt of interest or rental income until after 5 April 2012.
If you would like to discuss how you could make the most from any cut in the 50% top rate of tax, please contact Cormac Marum at Harwood Hutton on 01494 739500.