Menu

Our budget views in blue: Income tax

22nd March 2012

Highest rate reduction to 45% (from 50%) from Apr 2013 for incomes over £150k. Highest dividend rate reduction to 37.5%

 

The 50% income tax rate was somewhat punitive and the amount of tax raised debateable so we welcome the slight reduction. The thinking is that more will be raised this way (higher declaration). However, we cannot understand amounting this one a year in advance. Many people will delay payment of bonuses and dividends until a year’s time – leading to less tax being claimed in the short term.

Also the government confirms that 300,000 people will be drawn into the higher rate of tax as a result of the lowering of the limit. ISA’s and SIPPS become ever more attractive.