Disquiet among the UK’s best-paid consultants is growing amid revelations from their advisors that the Budget leaves them worst off than the government made clear.
KMPG explained the chancellor’s raid on workers earning over £100,000 will force some to pay tax at 60p in the £1, higher than the new top earning tax band of 50p.
A worker whose salary is on the £100k threshold will still get the full personal tax allowance, currently £6,475, and will pay income tax of £29, 930.
But from April next year, anyone who earns £103,000 – or other sums just over the limit - will lose £1 of their personal allowance in every £2 of income over £100,000, advisors say.
As a result, such earners must not only pay tax at 40% for the £3,000, but, as half of that is lost from their personal allowance, they will also pay 40% on the other £1,500.
Taken together, the levies mean the top earner will give 60p of every £1 they earn to the state on earnings between £100,000 and £112,950, KMPG said.
Once their earnings exceed £150,000, any extra income will attract the 50p in the £1 tax rate from April 2010, which will hit many professionals as soon as next week.
This is due to how their financial year, which often ends April 30, is set for many firms, which will see their forthcoming year will run into the 2010-2011 tax year.
Any profit made in this period will fall into the 50p band, yet the Treasury has insisted no one will actually pay out the new rate of income tax until April 6 2010.
In the following year, these workers on a salary will pay more than 50p in tax over £150,000 to reflect the half-percentage point rise in national insurance contributions.
Self-employed and limited company workers will also be affected by the rise in NICs, yet tax on dividends of over £150,000 dictates a smaller tax take of 42.5p in the £1.
These increased tax rates for high-earners apparently caused fierce division among Cabinet ministers, according to Whitehall whispers heard by the Sunday Telegraph.
Commons leader Harriet Harman reportedly pushed for the 50p band to apply on earnings over £100,000, in contrast to Hazel Blears, the communities secretary, who said £200,000 was a fairer threshold.
Meanwhile, former trade minister Lord Jones says the proposal of 50p in the pound for high earners, some of whom are in financial services, shows New Labour is about “the politics of revenge.”
The former CBI boss told the Observer that the Budget left him “depressed” and feeling “low,” partly due to it containing “no vision” by its creator or “leadership” by its government.
But ex-ministers aren’t the only ones feeling aggrieved :a government minister has placed a bet with a bookmaker at 66-1 that Labour will lose the next general election, while a public petition calling on Gordon Brown to resign now shows more than 10,000 names, compared with about 800 on Friday.
Apr 27, 2009
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