UK

Top Rate Tax Cut Will Benefit 643 Bankers, Labour Claims

06/04/2013 10:29 BST | Updated 06/04/2013 15:20 BST

Bankers and other millionaires will receive a tax cut from Saturday - sparking a furious debate between the political parties.

As the government tried to highlight the number of low-earners playing less tax, Labour claimed the scrapping of the 50p rate would benefit 643 bankers, who each earned more than £1 million a year.

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The changes were announced in George Osborne's 2012 budget

Senior Liberal Democrats also put pressure on Nick Clegg to reverse the move, which will reduce the top rate of income tax from 50% to 45%.

Party president Tim Farron said he thought cutting the 50 rate was "a stupid thing to do."

But the government hit back, pointing out that rich people were being taxed more than they had been under Labour.

Treasury Chief Secretary Danny Alexander said the Government was delivering big tax cuts for 25 million people.

On the BBC's Today programme, the Liberal Democrat would not be drawn on his views on the 50p rate.

But he said: "My priority as the Liberal Democrat in the Treasury has been to deliver as fast as possible the big income tax cuts for working people and overall to ask the wealthiest to pay more.

"The wealthy are paying more in every year of this government than they did during the entire period Labour was in office."

The first day of the new tax year sparked a propaganda battle.

Labour and the Tories produced rival adverts, with Labour branding it "millionaires' day" and the Tories highlighting the low rates of tax at the other end of the scale.

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Labour produced this poster to try to exploit the tax change

Labour also said struggling families would lose thousands of pounds in benefits and tax credits.

The party released figures claiming 643 bankers would receive a tax cut worth an average of £53,775.

Other changes kicking in on Saturday are the largest rise in the personal allowance, which means that no one pays any tax until they earn more than £9,440, and a fall in the higher rate threshold to £41,450.

But a one earner family with children will be £4,000 worse off on average in the next 12 months under changes introduced since the Coalition took power, according to Opposition analysis of figures published by the independent Institute for Fiscal Studies (IFS).

Overall, Labour claims UK households will be £891 a year worse off on average in the new tax year as a result of cumulative benefits cuts and tax rises.

Shadow Chancellor Ed Balls said: "People in work, people looking for work, stay at home mums and pensioners hit by the granny tax are all being squeezed like never before.

"Millions are paying more while millionaires pay less."

Also on the Today programme, he said he would not support a 50p top rate of tax if it was not raising revenue.

"I wouldn't support a 50p tax rate if it wasn't raising revenue but the reason why it's important to have it, the reason why it was introduced first in 2008 and then 2009 was at a time when families are paying a big price for the global financial crisis it is important that we share the burden fairly."

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