Budget 2012: 50p tax rate scrapped
The 50p income tax band will be scrapped, George Osborne has announced in the Budget.
From April 2013, the highest rate of tax will be 45p.
HM Revenue & Customs calculates that the cost of the extra 10p on tax on the highest earners only brings in £100 million a year, but that the loss of other tax revenues may even cancel that out.
In addition, Osborne highlighted that the increase of higher-rate tax from 40p to 50p raised only a third of the £3 billion it was supposed to.
Osborne added: "It raises at most a fraction of what we were told – and may raise nothing at all. No chancellor can justify a tax rate that damages our economy and raises next to nothing."
Russell Quirk, director of estate agents eMoov.co.uk, says that with the creation of the "mansion tax" - also announced in today's Budget - the abolition of the 50p tax rate is merely a "sugarcoating" to placate Osborne"s coalition partners.
Matthew Stephens, pensions tax expert at Prudential, adds that higher-rate taxpayers should take advantage of the 50% tax relief available on pension contributions, while they still can. "They can effectively double their money until the reduction in April 2013," he says.
This article was written by our sister publication Money Observer
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