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50% Rate could be axed in 2013 after revenue review

The 50p top rate of tax could be scrapped by 2013 after the Chancellor announced a review of its effectiveness at generating revenue.

Reports suggest George Osborne is considering dropping the tax in the 2013 Budget after he reiterated last week that it is only a temporary measure.

Osborne said now would not be the right time to remove the 50 per cent rate but it is “sensible to see how much revenue it actually raises”.

He asked HM Revenue & Customs to review revenues raised from the top rate of income tax on the basis of self-assessment forms returned.

The Office for Budget Responsibility said there is evidence that companies paying bonuses before the rate came in, as well as business owners paying themselves big dividends, has led it to assume £2bn of additional income had been collected in the 2009/10 tax year. It said those revenues would not be available this year.

The 2009 Budget announced the 50 per cent rate, which was introduced from April 2010. The 50 per cent rate is payable on income over £150,000.

CandidMoney.com founder Justin Modray says: “It is good news if the Government can afford it, particularly for the higher-earners. However, it may be a stretch if the growth figures come in under expectations.”

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