Budget 2009: A 50% top rate of income tax

Wednesday, 22 April 2009 5:07 PM

By politics.co.uk staff

Chancellor Alistair Darling announced in the Budget a new top rate of income tax of 50 per cent for those earning more than £150,000 from April 2010.

This represents a significant rise from the proposed level of 45 per cent and brings it forward a year as this rate would not have been introduced until 2011.

The Conservatives had previously said they would not undo the 45 per cent rate if they were to win the next election but it is not yet clear whether the same applies to this new higher rate.

Also from April 2010 those who earn more than £100,000 will see their personal income tax allowances gradually withdrawn as their salary increases.

There was more bad news for the one per cent of the population on more than £150,000 as the 40 per cent of tax relief they enjoy on pension contributions will decrease as their income increases.

This will come into force from April 2011 and, subject to consultation, tax relief on those earning more than £180,000 will disappear completely.

The chancellor also announced the government could make up to £1 billion in lost tax revenue over the next three years by closing up loopholes.

He said: "It cannot be fair that those that should pay tax are able to avoid it."

At the lower end of the scale he announced that child benefits would be increased by £20 by 2010 while child trust funds would rise by £100 for disabled children and £200 for severely disabled children.

As expected there was also encouragement for savers, with the annual limit for tax-free ISAs being raised to more than £10,000 for the over-50s this year. The scheme is being extended to everyone else next year.

Tags:
• budget
,
• economic policy
,
• economy
,
• economy and finance