16/03/2012 02:38 GMT | Updated 17/03/2012 13:12 GMT

Chancellor Preparing To Cut 50p Tax Rate In Budget

George Osborne is putting the finishing touches to his Budget amid claims he is prepared to cut the 50p top rate of tax.

Downing Street insisted the claims that the levy on earners over £150,000 would be reduced to 40p were "speculation" but government sources have confirmed the chancellor is set to introduce a "Downton Abbey" tax break for the television industry.

According to The Guardian, Osborne is set to push ahead with a reduction in the 50p rate after analysis found the levy is reaping far less for the Exchequer than expected.

A preliminary study, due to be published next week, is to show the tax on the highest earners is bringing in hundreds of millions, not the £2.6 billion predicted, the newspaper said.

Osborne has come under intense pressure from business leaders, as well as many in his own party, to slash the top rate of income tax amid claims it deters money-makers from being based in the UK. But some senior figures fear it would be politically dangerous to cut levies on the highest earners at a time of austerity.

Keep up to date with the Budget rumours..

David Cameron is set to meet Osborne, Nick Clegg and the Lib Dem chief secretary of the Treasury Danny Alexander today to thrash out the final details of Wednesday's budget.

The four men, known as the Quad, will need to finalise the speech as the details of the government's statement are set to go to the Office of Budget Responsibility (OBR) to allow the independent body to work out its official forecasts.

Clegg and Alexander may push for the introduction of a 'mansion tax' on homes worth over £2m by way of compensation.

According to The Times Lib Dem sources have said the party is not “ideologically opposed” to getting rid of the 50p rate.

Leading Lib Dems warned Osborne that any cut to the top rate of tax must be matched by new taxes targeting the wealthy.

More than 100 Lib Dem council leaders and council group leaders have signed a letter to the Chancellor insisting the priority should be to help the poor by raising tax thresholds.

Similar letters have been sent by the Lib Dem leaders in the Scottish Parliament and the Welsh Assembly.

In their letter, the councillors say: "One choice the Government should make is to ensure the wealthy pay their fair share and speed up the plan for the burden to be lifted on the poorest.

"This also means that if there is ever any reduction in the 50p top rate of income tax then new taxes that target the rich must be introduced so the wealthy pay their share."

One industry that is set to benefit from next week's statement is high-end television production. Shows like Downton Abbey could benefit from a tax break worth tens of millions of pounds a year under plans expected to be announced in the 21 March Budget, the Press Association reported.

The chancellor is expected to announce a consultation on extending to cinematic-style TV production the existing tax relief worth £100 million a year to the UK film industry. TV companies could see their corporation tax burden reduced by around 20%-25% as a result of the changes being considered.

Osborne hopes to help British companies compete in the increasingly popular market for film-standard TV series, until now dominated by US hits like Mad Men and The Wire.

It is understood the relief will be aimed at "culturally British" programming to help support shows distinctive to the UK for export to the rest of the world.

Lord Fellowes welcomed the tax break proposal, saying: "British television is second to none but unfortunately, time and time again, great British programmes are being made overseas where the tax climate is more favourable.

"If the Budget can address this, it would be a fantastic move forward for our industry and the country as a whole, as a host of new productions would undoubtedly be produced here, as they certainly should be."