According to HMRC’s latest figures, the number of Brits paying the highest tax rates has been higher than ever; double the amount of people compared to the same statistics two decades ago.
Over the last 5 years, stealth taxes (covert, indirect taxes) have pulled over 1.5 million middle earners into the top tax bracket. More than 5 million people now pay the 40-45 percent rate of income tax; that’s 1 in 6 people compared to 1 in 12 in the late 90s.
Previous governments have failed to increase the starting point of the 40% tax band in line with earnings meaning professionals such as police officers, teachers and nurses, who would have been paying the basic rate, now pay higher rate tax.
Former Pensions Minister Sir Steve Webb has stated that “doubling the amount of people paying the highest band of tax is to make profound changes to the taxation system”. He also claims that these changes should be discussed openly and not “delivered by stealth”.
The current number of taxpayers paying the 45 % rate is under half a million, however the amount these people contribute nearly the same to the UK tax system as the 25 million people who only pay the basic rate of tax. In total, higher rate and above taxpayers are responsible for over 65% of income tax receipts.
There has been a small change made in this tax year with the starting threshold for the higher tax changing from £40,000 to £45,000. This could lead to a slightly lower amount of tax payers in the highest bracket but the number of taxpayers in the highest bracket will still be twice as high as it was 20 years ago. It is worth noting that the benefit of the threshold change was reduced due to the increase to £45,000 of 12% NI contributions. The Conservative Party has pledged, in their latest manifesto, to raise the starting point to £50,000 for the 40% tax rate.
The Treasury claims that, from April onwards, over half a million tax payers will financially benefit from the increase in threshold.
For more information or to get help with tax and tax returns please call your The Financial Management Centre on 0800 470 4820 or 0333 202 7198.