Higher Rate Taxpayers To Top 4 Million

PA  |  Posted: 1/05/2012 22:11 Updated: 2/05/2012 10:04   PA

Tax Return
There could be five million higher rate taxpayers by 2014

More than four million people will pay the highest rates of tax during this financial year, HM Revenue and Customs (HMRC) figures have shown.

The Revenue body forecasts that 3.8m people will be taxed at the 40% rate and a further 307,000 will fall into the 50% additional rate threshold, making 4.1m taxpayers in total.

The figures, published on HMRC's website, show a rise of 917,000 from the number of people who were paying a higher rate three years ago, representing an increase of around a third over the period.

Cuts in the higher rate threshold will see more taxpayers swept up. The Institute for Fiscal Studies has said that the number of higher-rate taxpayers could hit five million for the first time in 2014.

John Whiting, of the Chartered Institute of Taxation (CIOT) told the BBC: "The combination of that happy couple, fiscal drag and cuts in the higher rate threshold, is pushing more people into the higher rates where they can contribute more to cutting the deficit."

The 50p top rate on earnings over £150,000 introduced by Labour will controversially be cut to 45p from April next year.

The number of people set to pay the basic rate of tax at 20% is set to fall, to 24.8m this year, the HMRC figures showed while the total number of income tax payers is set to drop this year to 29.7m, from 30.1m in 2011/12, as personal tax allowance increases take more people on lower incomes out of paying income tax.

Meanwhile, a union has claimed that more than 200,000 couples have been "plunged" into poverty after losing up to £73 a week because of cuts to tax credits.

Usdaw said that from last month couples with children had to increase their working hours to at least 24 hours a week or lose all their Working Tax Credit, worth up to £3,870 a year.

Official figures showed there were 203,000 couples, with 449,000 children, who were working between 16 and 24 hours a week when the new system came in.

These families will have lost all of their Working Tax Credit from 6 April unless they fulfilled a small number of exemptions for disability or caring, likely to affect fewer than 10,000 couples, said Usdaw.

General secretary John Hannett said: "The government defended its shameful attack on working couples trying to do the right thing by insisting they would be able to get extra of hours of work. The government's own figures released today blow that claim out of the water.

"If they have an ounce of decency or concern for real people then ministers should accept that they have got this wrong and should immediately suspend the changes until Universal Credit is introduced in 18 months' time.

"Thousands of our members have been affected by the cuts. The government's decision to ignore the advice of Usdaw, businesses and charities that substantial numbers of families would face severe hardship, debt and even the loss of their homes, shows how out of touch they are - both with economic reality and with the appalling hardship their policies are causing."

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Filed by David Hobbs  |