Chancellor George Osborne has announced he will reduce the rate of tax for the most wealthy from 50 to 45 pence on the pound, saying the rate brought in ‘only a fraction’ of amount intended.
In today’s Budget speech, Mr Osborne said: “A 50p tax rate, with all the damage it does to Britain’s competitiveness, can only be justified if it raises significant amounts of money.”
According to Mr Osborne, Labour claimed the tax would bring in £3bn of revenue to the government. However, he said it actually brought in only one-third of that.
He said: “HMRC found that an astonishing £16bn of income was deliberately shifted into the previous tax year at a cost to the taxpayer of £1bn, something that the previous government’s figures made no allowance for.”
The lower rate will come into effect in 2013.
Mr Osborne also announced in his statement that corporation tax would be reduced to 22 per cent by 2014, after dropping the rate to 24 per cent for the current tax year.
The Chancellor also announced a £1,100 increase in the tax free allowance for lower earners beginning next April. This means workers can earn up to £9,205 before owing any tax.
This is in line with the government goal of raising the tax free allowance to £10,000.
