Myners admits 50% tax will flop

4 February 2010 | By Hannah Stodell

City minister Lord Myners has revealed that the Treasury has “significantly reduced” its estimate of the revenue that the new 50p rate of income tax will bring in.

Speaking in the House of Lords on Monday, Myners suggested that high-earners will dodge the tax hit, saying that, due to “behavioural consequences” of taxation change, the Government has revised down its expected revenue.

The Treasury had originally forecast that the 50 per cent tax rate for those earning more than £50,000 which is set to come in from April would bring in £1.13bn in revenue for 2010 and £2.5bn in 2011.

Lord Myners did not give a new estimate for expected revenue from the change but said: “We still believe it will be beneficial.”

Skandia head of tax and financial planning Colin Jelley says: “Everybody felt that the Government was being incredibly optimistic in its assumptions. It did not factor behavioural change into its calculations. When tax gets to 50p, that is quite a psychological barrier for a lot of people because suddenly half of their income is going to the Government.

“People are increasingly looking at how they structure their investment returns for capital gains rather than income. Others are fed up living in the country and this will be the tipping point.”

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