Member Article

Rich to lose most from new tax measures

750,000 more people are set to become higher-rate taxpayers in April, according to a leading economic research body.

It comes as the threshold for the higher-rate 40% income tax rate will reduce from £37,401 to £35.001.

The Institute for Fiscal Studies (IFS) estimates the average household will be £200 a year worse off as a result of tax rises and benefit cuts taking effect on 5 April.

The IFS estimate that 500,000 people will no longer pay income tax owing to the changes.

James Browne, a Senior Research Economist at the IFS, said: “While taking 500,000 out of tax altogether, the way that the government has increased the personal allowance to ensure that higher rate taxpayers don’t gain will increase the number of higher rate taxpayers by 750,000.

“We calculate that a further 850,000 would be brought into this higher rate bracket by 2014-15 if the government reaches its ambition of a £10,000 allowance in the same way”.

On the other end of the spectrum lone parents who are not working, and low-to-middle income households without children will be those who benefit from the new tax system.

This is due to the rise in the personal allowance, and rises in the child element of Child Tax Credit.

It means that an individual earning £7,475 a year will pay £275 a year less in income tax and National Insurance with the introduction of an increased personal allowance.

This was posted in Bdaily's Members' News section by Ruth Mitchell .