More than 500 business leaders called today for the "damaging" 50p top rate of tax to be ditched in the budget.

More than 500 business leaders called today for the "damaging" 50p top rate of tax to be ditched in the budget.

Entrepreneurs from across the country accused Chancellor George Osborne of putting "populist politics before sound economics".

They claim the levy is halting the expansion of their businesses and warn the tax has left money-makers in a "very awkward position".

In a letter to The Daily Telegraph, 537 small and medium-sized business owners said: "Given the current state of the UK economy, we urge the Chancellor to urgently consider scrapping the top rate of tax in his forthcoming budget.

"The tax, which is in effect a 58p tax after national insurance is taken into account, puts wealth creators like us in a very awkward position.

We believe the richest should help the poorest in society. 1% of taxpayers are forecast to contribute nearly 28% of income taxes. But penalising high earners through an unfair, politically-motivated tax puts populist politics before sound economics."

The letter adds: "The result is that the 50p tax is set to reduce government income, and damage the economy, the public services and charitable giving."

Earlier this year David Cameron said he still regarded the rate - introduced by Labour in 2010 - as a "temporary" measure following reports that the Government had accepted would be politically difficult to axe it before the 2015 general election.

Among the signatories is Tony Stein, director at Canterbury Care. He said: "The 50p tax rate is a disincentive to job creation. Times are hard and reducing the resources available to entrepreneurs to reinvest in new business is the wrong outcome for the country."

Andrew Denny, managing director of Fix-a-Form International, said: "I am simply trying to create wealth for me, my kids and my loyal staff. Why are high earners treated like they have committed a crime and should be punished?"

Martin Jones, operations director at Covpress, said: "The 50p tax is unfair and unjustified."

Rachel Reeves, shadow chief secretary to the Treasury, said cutting tax was not "the priority now": "When millions of families and pensioners on middle and low incomes are being squeezed by the VAT rise and cuts to tax credits, cutting taxes only for the richest 1% cannot be the right priority now.

"But these business owners are right to call on the Government to take action to stimulate growth and jobs in our economy."

In July chief secretary to the Treasury Danny Alexander said those who thought the priority was to cut the 50p tax were living in "cloud cuckoo land."