Top rate of tax soon to trap 500,000

THE top rate of income tax will soon catch half a million people, analysis of official data shows, as the Treasury faces calls to raise the threshold.

Last night tax experts warned that the 45 per cent “additional” rate was no longer a tax on the 1 per cent and hit those “unlikely to feel super wealthy”.

Additional rate tax is payable on earnings over £150,000, a threshold that has not changed since 2011. The 500,000 figure is more than double the number who paid it seven years ago.

Meanwhile the Government has reduced the tax bills of millions of lower earners by raising basic and higher

income tax thresholds faster than wage growth. In the current tax year a record 393,000 people will pay the 45 per cent rate, an increase of 67 per cent since it was introduced seven years ago.

Based on current trends, the number of earners caught in the tax band will rise to 500,000 within three to five years, according to analysis by accountancy firm Saffery Champness.

In 2011, a salary of £140,000 – £10,000 below the additional rate tax threshold – was enough to put someone in the top 1 per cent of earners. But now HMRC says a £177,000 salary is required to be in the top 1 per cent. Sam Dumitriu, head of research at the Adam Smith Institute think tank, joined calls for the threshold to be increased – or indexed to real wage growth – to prevent people being victims of a “stealth tax rise”.

Mike Hodges, of Saffery Champness, said: “There is an argument for raising the threshold as it is no longer a tax on just the 1 per cent. However this doesn’t get much sympathy from the public.”

An HM Treasury spokesman said: “Our fair tax system means that the top 1 per cent of income taxpayers now pay nearly 28 per cent of all income tax.”