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Is Osborne planning higher rate tax cut?

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Former Conservative chancellor Lord Lawson is urging George Osborne to slash the top rate of income tax to 40p in next month’s Budget, with the Treasury reportedly considering the move.

According to the FT, Osborne plans to use the Budget to signal a shift towards a “lower tax, lower welfare” economy.

The Chancellor has reportedly indicated in Treasury meetings he could cut the top income tax rate from 45p to 40p on earnings above £150,000.

Lord Lawson told the FT: “I would strongly support this: It would significantly enhance the attractiveness of the UK as a place to do business, at no cost in terms of lost revenue.

“That was the experience when I brought the top rate down to 40 per cent in 1988 and it is even more relevant today.”

The move, which is expected to cost £900m, would likely be presented alongside reforms to hit the rich, including slashing pensions tax relief and tackling tax avoidance.

Ahead of the general election, the Conservatives outlined proposals to reduce the annual allowance for people earning more than £150,000. Under the plans, annual allowances will be tapered away on earnings between £150,000 and £210,000, with those earning £210,000 seeing their allowance cut from £40,000 to £10,000.

However, in an interview with Money Marketing, former pensions minister Steve Webb described the plans as “hideous”.

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Richard Anderson 25th June 2015 at 9:13 am

    I am firmly of the view that we need to encourage success and entrepreneurship, and that taxation can act as a dis-incentive to these aims, so am broadly in favour of tax cuts, but why not help everyone – how about a personal allowance in line with basic living costs (say £20k pa), then a 10% starting rate for the next £30k, 20% up to £75k and 40% over £100k, all rising with average earnings.

    Perhaps we should seek to run the country on a tax-take that is fair, rather than taxing the population on our hugely expensive state. (When I go to Tesco I shop based on what’s in my wallet, not based on all the lovely things I would like to put in my basket)

    Also, I think that pension tax relief should be in line with the tax rate paid – i.e. full relief at highest marginal rate, that we should remove the pointless ‘Lifetime Allowance’ (which penalises successful investment) and merely limit contributions to say 100% of earnings up to £40k (with full use of carry back for the past five years, without the cap of current earnings, and only requiring 100% of current earnings to qualify, not the present £40k.

    All too simple?

    Discuss…
    (n.b. Richard Anderson, APFS – not the other one)

  2. Such a move would be a gift to the left and anti-austerity campaigners. Far better that he address the tax band anomalies that have grown up in recent years and starts reversing the 40% tax rate creep – projected to bring 6 million people into higher rate tax bands by 2020 if left unchecked.

  3. Richard Silverwood 25th June 2015 at 9:48 am

    I don’t think George worries too much about the “left” any more.

  4. Christine Brightwell 25th June 2015 at 11:56 am

    I suppose he could cut the taxes for the rich and re introduce serfdom and slavery – marvelous for business

  5. In response to the head line; not unless more people start to access their pension pot NO !!

    This is the sticking point in his catastrophic plan !

  6. @Christine if you earn say £290,000 you pay approx. £125,000 in NIC and income tax so the “rich” pay for many of the benefits that the “poor” receive. It is a well known Global Fact that if you tax the “rich” too much, the tax intake reduces. I think taxing Buy to Let landlords that have more than say 2 houses would be a better strategy and a plan to lower rental charges so that our children/grandchildren can save for their own house instead of the considerable growth in rental charges over the past few years.

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