As the new financial year begins so enters the new 50 percent rate for high earners. Around 300,000 people, the highest earners in the land, will be affected by the new tax rate.
Under the new laws individuals who earn upwards of £150,000 will face having half of their income taken away as the UK government goes on the offensive in a bid raise extra revenue; it is thought that the 50 percent tax will see a sum close to £2.4billion go to the government.
A further 600,000 people, those who earn over £100,000 will also be struck by a diminished personal tax allowance which will in turn add to the governments fortunes by an estimated £1.5billion per year. The 600,000 in question will also see an increase in their pension contributions.
While the tax hike is solely aimed at raising public finances some people are sceptical as to whether the initiatives will have the desired effect. In fact the Institute of Directors fear that it will only serve to harm investment, entrepreneurs and general business confidence. A spokesman for the IoD said: “We believe the 50p rate is likely to raise little or no tax overall in the short-term, and lead to lower overall tax revenues in the medium to long-term.”
There are also fears that the high tax will simply lead to high earners departing England for cheaper shores. Directors could also choose to relocate their headquarters which would lessen the government’s corporation tax income. Speaking to the BBC Patrick Stevens, a partner at Ernst and Young offered this grim foretelling: “They will leave the UK or not come to the UK. Undoubtedly fewer people are coming (to the UK), to make up for the normal leavers, so the population of those high earners is going down.”
If your earnings fall under the new tax bracket and you are interested in other options then visit our offshore banking section or speak to an IFA and see what you can do to preserve your wealth.