350,000 more earners must pay 45p rate

AROUND 350,000 more workers are being dragged into the 45p top rate of income tax.

The threshold was cut by Jeremy Hunt from £150,000 to £125,140 yesterday – covering the top 2 per cent of earners.

In its snap Budget analysis, the Institute for Fiscal Studies said the Chancellor’s decision would ‘ increase the number of additionaltaxpayers by about 350,000, bringing the total to approximately one million’.

The think-tank said that this would be up from a total of 236,000 when the additional rate was introduced in 2010-11.

The change to the threshold will hit the 639,000 workers who take home more than £150,000 a year with an additional tax bill of £1,200. A worker on £130,000 per year will pay an extra £243 a year, while someone on £140,000 will pay £743 extra.

Overall the move will raise £855million a year for the Exchequer.

It is yet another major departure from the ‘Growth Plan’ of Mr Hunt’s predecessor Kwasi Kwarteng, who announced he was abolishing the 45p rate of tax entirely before being forced to reverse the move.

Yesterday the Treasury said cutting the 45p threshold was ‘to ensure those with the highest incomes contribute more to help strengthen public finances’. Mr Hunt added:

‘We are honest about the challenges and fair in our solutions. We are asking more from those who have more.’

The wealthy will also be hit by changes to capital gains tax, dividend tax and inheritance tax, which will collectively raise £3.3billion for the Exchequer. Liz Truss and Mr Kwarteng were forced into a humiliating late-night U-turn on their decision to remove the 45p tax band.

They reversed the policy after a rebellion from Tory backbenchers including Michael

Gove. Mr Hunt’s decision to tax the wealthy was reminiscent of the policies of his predecessors Gordon Brown and George Osborne, who sought to protect benefits claimants and minimum wage earners respectively while making the rich pay more.