Squeezing us dry
The Chancellor said last week that the 50p income tax rate for those earning more than £150,000 would raise £1.1 billion, but figures revealed yesterday suggest that he expects to lose £2.5 billion as many of the 350,000 higher earners take action to avoid, through legal means, paying the rate by working fewer hours or moving abroad.
It emerged yesterday that HM Revenue & Customs was preparing to spend a quarter of its £4 billion budget to crack down on tax evasion, but accountants said that that would do little to validate the 50p tax rate. Angela Beech, a tax partner with Blick Rothenberg, the accountant, said: “Some of our clients are already talking about leaving the country, while others are looking to retire early or cut their hours to reduce their income.”
However, the Treasury expects the tax take to rise from 31 per cent to 38 per cent in 2011, when new rules will make pension contributions much less tax efficient.
You can only milk a cow for so long before she gets fed up and kicks the cluster off.