Grant Thornton warns tax changes will hit finance talent

  • Story by: Charlotte Adlung
  • Magazine: InvestmentAdviser
  • Published Monday , December 01, 2008

The City’s position as a magnet for top financial talent is under threat from the recently announced pre-Budget report, which proposes higher rates of tax and national insurance contributions for high earners, according to financial and business advisory firm Grant Thornton.

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Francesca Lagersberg, head of the national tax office at Grant Thornton, said: “The combined increase of income tax and NIC means higher earners will suffer an effective tax rate of 46.5 per cent.

"In the global war for talent, this must damage the City's ability to attract and retain the brightest and best, and over time is likely to erode the UK's competitive position.”

Last week, the UK government said it would initially reduce the personal allowance for those earning more than £100,000 by half from 2010, before completely abolishing it for those earning more than £140,000 by 2011.

This alone will net the Treasury an additional £2.15bn.

The pre-Budget report also proposed rises in employee NIC by 0.5 per cent from 2011, which will hit high earners, Grant Thornton said.

Ms Lagersberg said the move would "add to the feeling among the wealthy that the government is asking them to foot the bill for the financial turmoil engulfing the markets".

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