Finance News

Million Extra People Pay More Tax Due to Coalition budget

Almost a million people in the UK have been placed into higher tax rate bands as a result of changes made by the Coalition Government’s Budget changes.
The tax office has published figures that indicate that nearly a third more of the UK workforce will pay income tax at 40%. The total number of people paying tax at a rate of 40% or more has now risen to 4.1 million people. Of those people 300,000 of them will pay 50% income tax on their earnings.
The reductions in the threshold needed to pay the 40% tax rate is one of the major reasons for the rise in numbers along with an effect called “fiscal drag” which is where the tax bands no not rise at the same rate as inflation.
Less of the UK will workforce will pay tax this year, the number is set to fall from 30.1 million to 29.7 million due to increases in the personal tax allowance. This will mean that some low earners will have to pay little tax or none at all. The number of people paying the standard 20% rate of income tax has fallen from 27.1million to 24.8 million people.
Grant Thornton, tax specialist Mike Warburton said that the rising number of people having to pay the higher levels of tax was “an inevitable consequence of the Coalition’s policies on tax rates”.
“Higher-rate tax used to be paid only by the genuinely wealthy,” he said. “It is now a rate paid by middle managers, teachers and middle-ranking NHS executives, none of whom would consider themselves to be wealthy by any means.”
A Treasury spokesman said that the higher rate tax threshold remains the same as last year. “The increase to the personal allowance in 2012-13 has not created new higher rate taxpayers, although there will be some people whose income increases over the two years, meaning that they move into the higher rate.”