Top rate of income tax could be cut to 45p

The Government is considering cutting the top rate of income tax from 50p to 45p as early as next year, according to reports.

Quoting “Government sources” the Independent says the move, affecting those earning over £150,000, could be unveiled in next April’s Budget.

According to the report, a senior Conservative says: “The decision is not about whether to do it  – it is about when to do it. One option is 2012, depending on the economy, or 2013 at the latest. We want it to have come into effect by the next general election.”

At the Budget in March Chancellor George Osborne said he regards the top rate of tax as a temporary measure and that he had asked HMRC to review the revenues raised by it.

Treasury projections suggest that as much as 70 per cent of the £2.4bn generated from the 50p rate would still be collected if it was cut to 45p.

Any cut would come as an embarrassment to the Liberal Democrats and Treasury chief secretary Danny Alexander in particular. Last week, on BBC 1’s Andrew Marr programme, he argued that those who thought the Government would prioritise cutting the 50p rate were living in “cloud cuckoo land”. The LibDems want an increase in the income tax threshold to £10,000 to be the Government’s priority.