Top-rate taxpayers can still claim benefits

THOUSANDS of people paying the top rate of tax will be able to claim benefits from April, thanks to Jeremy Hunt reducing the threshold last year.

From next month, people will start to pay the 45p rate of income tax when they earn more than £125,000, down from £150,000 at the moment.

The change was announced by the Chancellor in November.

The reduction means many people paying the top rate of tax will still be eligible for Universal Credit, according to

Policy in Practice, a consultancy group. It found that those earning up to £148,000 could technically be allowed to claim it if they had children, rented their home and had high childcare costs.

Hundreds of thousands of 40p taxpayers are also eligible for the payment, the group said.

Mr Hunt is promising a “back to work budget” with benefit changes designed to encourage people to take up jobs and work more hours.

Yet the analysis finds that the benefits system imposes punitively high marginal tax rates on middle earners as Universal

Credit and child benefit is withdrawn. Many people reaching an income of £50,270, the level at which the 40p rate kicks in, lose money by earning more with marginal tax rates of more than 100 per cent providing a strong disincentive to take a promotion or work more hours.

Deven Ghelani, the director of Policy in Practice, said: “This analysis highlights how ludicrous the tax and benefit system has become. The Government can make some sensible changes in the system to eliminate the most egregious anomalies in the upcoming Budget.”