As many as 750,000 income taxpayers could find themselves in a higher tax bracket this April, a new study has claimed. According to the Institute for Fiscal Studies (IFS), three-quarters of a million will see some of their earnings lifted into the 40p in the pound tax band come 6 April.
The threshold at which people start to pay the 40 per cent tax rate is to drop from £43,875 to £42,475 from that date. As a result, once the rise in the personal allowance is taken into account, the higher 40 per cent rate will apply to incomes above £35,001.
IFS calculations pointed out that the best-off 10 per cent of households will, on average, shed 3 per cent of their net income as from April compared with an average of 1 per cent for the rest of the country.
James Browne, a senior research economist at the IFS who authored the report, warned that the number of higher-rate taxpayers could go on rising when the tax-free personal allowance is raised towards the £10,000 mark.
He said: “The way that the government has increased the personal allowance to ensure that higher rate taxpayers don’t gain will increase the number of higher rate taxpayers by 750,000. We calculate that a further 850,000 would be brought into this higher rate bracket by 2014-15 if the government reaches its ambition of a £10,000 allowance in the same way.”
With several changes planned for the tax system, now may be a good time to look at your own personal tax planning. We are here to make sure that you pay no more tax than you should be paying.