Budget 2009: Alistair Darling targets rich with 50% tax | UK news | The Guardian Budget 2009: Alistair Darling targets rich with 50% tax • 50p top tax rate for those earning over £150,000 • Chancellor unveils £1.7bn job creation scheme • UK economy set to shrink by 3.5% this year Wednesday 22 April 2009 11.48 EDT First published on Wednesday 22 April 2009 11.48 EDT Close This article is 7 years old Alistair Darling today pledged to reinvigorate Britain's ailing economy with a £1.7bn job creation scheme and a new 50p income tax band for the highest paid. With the UK economy set to shrink by 3.5% this year – its worst performance since the second world war – the chancellor attempted to draw clear dividing lines between Labour and the Conservatives by breaking a Labour manifesto promise and raising income tax for those earning more than £150,000 to 50% .

The Tories reacted quickly to limit any damage, insisting they would not block the move. It would see anyone earning more than £150,000 paying an extra £220 a month in tax. Early indications suggested the poor would still pay proportionately more than the rich because of a rise in fuel duty. The 50p tax rate replaces the planned 45p new top rate announced in November's pre-budget report, and will kick in in April 2010 – a year earlier than planned. The new rate will only affect 1% of earners, who will also see tax relief on their pension contributions curbed. Those earning more than £100,000 will also lose their personal income tax allowance from next April. Admitting there were "no quick fixes" or "overnight solutions", Darling argued that it was right that those who earned the most should pay more. Vowing not to repeat the mistakes of the past, he pledged to protect investment in schools and hospitals and help homeowners and jobseekers. An extra £260m will be allocated for training and subsidies for out of work young people.

"We must ensure that short-term job loss does not turn into a lifetime on benefits," Darling said. "You can grow your way out of a recession – you can't cut your way out of it." Figures announced earlier today showed unemployment has jumped by 177,000 in the three months to February, rising to 2.1 million – the highest number since Labour came to power in 1997 and one giving a jobless rate of 6.7%. Darling also pledged that: • Tobacco duty will rise 2% from 6pm today. • Alcohol duties will rise 2% from midnight. • Fuel duty will rise 2% from September and 1% above indexation every April for next the four years. • The stamp duty holiday on homes under £175,000 will be extended until the end of 2009. • A car scrapping scheme will offer a £2,000 discount on new cars when vehicles over 10 years old are traded in. • The child element of the child tax credit will increase by £20 from April next year. • State redundancy pay will rise from £350 to £380 a week.

• Grandparent care for young relatives will count towards the basic state pension. • The annual ISA limit will increase from £7,200 to £10,200. • £525m will go to offshore wind power projects and £405m new funding to low-carbon technology projects. Responding to the budget, the Conservative leader, David Cameron, said Britain could not afford another five years of Labour . He told the Commons any claim the Labour government had ever made to economic competence was "dead, over, finished". Nick Clegg, Liberal Democrat leader, added: "Taxes are still too heavy on those who can least afford it and too easy to avoid for those who know how. "That's how this government and the Tories seem to want it." During his second budget statement, the chancellor said the recession and credit crunch had blown away the growth and deficit forecasts he made in November's pre-budget report as he forecast that the government would borrow a record £175bn in this fiscal year. Financial markets reacted badly.

The FTSE 100 shed about 30 points during the speech, falling to 3957, while the pound lost nearly a cent against the dollar, to $1.452, and as much against the euro, to €1.12. Darling forecast that the economy would rapidly return to growth next year, expanding by 1.25%, although that is a far more optimistic outlook than that of most City economists. Earlier today, the Office for National Statistics reported that net borrowing for the 2008-2009 fiscal year, which ended last month, was £90bn – £12bn worse than the chancellor predicted in the November pre-budget report and more than double last year's budget forecast of £43bn. The main cause of the rising deficit has been a collapse in tax receipts, particularly of VAT and corporation tax, as the economy and City have slumped. Spending, however, has continued to rise in line with Labour's plans, buoyed by growing expenditure on unemployment benefit as the jobless total has risen by more than 600,000 in the last year.

The chancellor said national debt would rise from 51% now to a peak of 79% in 2013-2014 before it started to drop back. Darling announced that the widely expected car scrappage scheme, designed to help the car industry, would be introduced shortly and would run until March next year. But he confirmed that fuel duty would rise in September and then in April for each of the next four years as a way of bringing in revenue. The chancellor said the limit for ISAs would be increased to £10,200, up from £7,200. For those aged 50 and over, this will come into being this year and will start next year for everyone else. Around 350,000 people in the UK are currently earning more than £150,000 and will be liable to pay the new 50% rate of income tax. Patrick Collinson, the editor of Guardian Money, said: "Someone on £500,000 a year will be paying £37,590 extra in income tax in 2010-11.

"If the same individual maximises the pension tax relief – they can put in up to £245,000 of their salary and get relief – then the cost of the tax relief clawback will be around £51,000. "So some people in the £500,000-plus bracket could be close to £100,000 a year worse off after today's budget. "In addition, 700,000 people in Britain earn more than £100,000 a year and will lose their personal allowances. "At today's levels this suggests a tax increase of around £220 a month for GPs and those on similar salaries." Budget 2009: Top Earners To Be Taxed Up To 50% | UK National News, 22/04/2009 22/04/2009 Budget 2009: Top Earners To Be Taxed Up To 50% Top earners in the UK face a top tax rate of 50%, the Chancellor Alistair Darling has announced today in his 2009 Budget.

Delivering his second Budget in the House of Commons, Mr Darling acknowledged Britain is facing the deepest recession since the Second World War and admitted the economy would suffer as a result. Warning that output would shrink by 3.5% this year - more then doubling his previous forecast - he added that Britain would borrow an additional £703bn over five years. Mr Darling said the 50p tax rate - which replaces the 45p new top rate announced in November's pre-budget report - will only apply to the few earning over £150,000 per year, who will also see tax relief on their pension contributions curbed. The new rate will begin in April 2010,a year earlier than planned. The Chancellor announced petrol duty would be raised by 2p in September, while alcohol has risen by 2% - effective from midnight - and tobacco will rise by 2% from 6pm this evening. Referring to the global economic downturn as the "worst in 60 years" he said the budget would build on the "strengths of the economy and its people and help speed recovery". Mr Darling said the impact of the global recession was being felt in every continent, country and community.

He told the Commons: "When the world economy was plunged into deep crisis in the 1930s, the response, both nationally and internationally, was too little and too late. "This failure to act turned a serious downturn into a prolonged depression. We will not repeat those mistakes again." He said international governments had taken action and "this action, taken promptly and decisively, gives us good grounds for confidence". Mr Darling announced a number of packages to help families, including a child tax increase to £120 from next April. He also said the Government would protect investment in schools, hospitals and other key public services, while rebuilding the financial services sector. Statutory redundancy pay would increase from £350 to £380 and cold weather payments for pensioners would remain at £250 and £400. There will also be more assistance to get people back into work quickly and support businesses and homeowners facing problems. Everyone under the age of 25 out of work for 12 months or more will be offered a job or a place on a training scheme. The government will also create or support up to 250,000 jobs in deprived areas.

The Chancellor announced £250 million and then £450 million over the next to years to maintain 54,000 sixth form places. As expected stamp duty holiday on homes up to £175,000 were extended to end of year. In an attempt to boost the ailing motor industry, a car-scrappage scheme is to be introduced. Anyone with a car registered before December 31 1999 will get a cash incentive of £2,000 to trade their old vehicle for a brand new one. Conservative Leader David Cameron, however, said the Budget had not done enough to get spending under control and "Britain simply cannot afford another five years of Labour". In a scathing attack, he added: "As of today any claim they have ever made to economic competence is dead, over, finished." (JM/BMcC) Related UK National News Stories Click here for the latest headlines. 09 October 2007 Darling Delivers Pre-Budget Report Chancellor Alistair Darling has delivered his pre-Budget report in the Commons. Mr Darling predicted that Britain's economy would grow between 2% and 2.5% next year.

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Currently all three and four-year-olds and two-year-olds from the most hard-pressed homes are eligible for 15 hours free childcare each week. Liberal Democrats want all children to have the opportunity to get the best start in life. 24 March 2010 Budget Rounds On Recovery First time buyers in the UK will be exempt from forking out stamp duty on properties over £250,000, the Chancellor announced today, in what could be the Labour Government's final Budget. The gap left will be filled by those paying for houses valued more than £1m, Alistair Darling said. 09 June 2005 Road charging plans announced by Darling Transport Secretary Alistair Darling has announced plan to charge motorists for driving on Britain’s roads. The Transport Secretary said that the measures, which could see motorists charged up to £1.30 per mile for driving in extremely congested areas, were necessary to prevent “gridlock” on Britain’s roads in the next twenty years. 12 December 2012 One In Three Year Six Children Overweight One in three final year primary school children are overweight or obese.

The percentage of final year – Year 6 - primary school children (generally aged ten to 11) who were overweight or obese increased to 33.9 per cent in 2011/12, up from 33.4 per cent in the previous year. 22 March 2006 Chancellor Gordon Brown has delivered his tenth Budget address today, with a number of changes for schools, road taxes and the environment. Northern Ireland Weather This Evening and Tonight: Clear intervals and showers, these frequent, blustery and locally heavy during the evening, then easing during the early hours of Tuesday. Turning cloudier by morning with some patchy rain, with winds easing. Minimum Temperature 5 °C. Tuesday: Cloudy with occasional rain in the morning. A drier spell in the afternoon but more rain reaching western counties by evening. A milder day. Maximum Temperature 10 °C.

Budget 2009 � Personal Tax Highlights - Tax - UK Withers LLP Higher Earners And Trustees Face A 50% Income Tax Rate In a Budget delivered against a backdrop of public borrowing which is set to be 12% of GDP for the current year, the stakes were raised with the introduction of a new 50% additional income tax rate for those with income of �150,000 or more, effective from 6 April 2010. This was combined with restricted tax relief for pension contributions, again for those earning �150,000 or more. The new income tax rate will apply equally to most forms of discretionary trusts. These measures highlight the increasing differential between income and capital gains tax rates, and from next April this will be up to 32% for 50% rate taxpayers. This must place increasing emphasis on a careful tax strategy in investment selection, and seeking to invest for capital rather than income returns.

It may therefore be said that the introduction of the reporting status fund regime, under which certain types of offshore fund can elect for investors to receive capital gains rather than income treatment on the sale of their investments, is very timely and likely to be of interest to many such funds. It may also be said that there is some contradiction between the corporation tax measures designed to enhance the UK's attractiveness as a jurisdiction for international holding companies, and the higher income tax rates, which will apply to the executives of those companies if they choose to base themselves in the UK. Income Tax A New Additional Rate For Individuals And Trustees In contrast to the announcement at the Pre-Budget Report last November, those with taxable income above �150,000 will pay income tax on that income at a rate of 50% from 6 April 2010. It had previously been announced that the income tax increase would be to 45% with respect to such income only from 6 April 2011. This increase also applies to dividends received by individuals with taxable income above �150,000, which will be taxable at a new 42.5% dividend rate.

This reflects the one-ninth tax credit available for dividends paid by UK resident companies and, in some circumstances, by non-UK resident companies. The 50% rate and the 42.5% dividend rate will apply equally to trustees of most discretionary trusts, and appears to continue the trend of treating trusts unfairly. Trustees will be taxed in the same way as those with income of �150,000 or more, notwithstanding the actual level of taxable trust income. Restricted Personal Allowances It was further announced that personal allowances will be restricted for those with 'adjusted net income' of �100,000 or more, as of 2010-2011. Above this threshold, �1 of allowance will be lost for �2 of income, with a possible reduction in the allowance to nil according to the amount of income above the threshold. This is a change from the announcement in the Pre-Budget Report in November, in which a two-stage reduction was contemplated.

Essentially 'adjusted net income' refers to gross income minus specified deductions, including trading losses and payments made gross to pension schemes, as well as grossed up Gift Aid contributions and grossed up pensions contributions which have already been subject to tax relief at source. Restricted Pensions Credit In addition to the introduction of the additional 50% rate, it was announced that income tax relief on pension contributions will be restricted, so that relief will be progressively reduced to the basic 20% rate, as of 6 April 2011. Under current rules income tax relief at the higher rate is available on pension contributions up to �245,000 (subject to a limit of 100% of earned income) and will be available for contributions up to �255,000 for the 2010-2011 tax year.

To forestall increased contributions in advance of that date, a series of 'anti-forestalling' measures were announced to deprive higher rate income tax relief on contributions made from today for taxpayers with income of �150,000 or more who, between now and April 2011 either (i) change their normal pattern of pension contributions, or (ii) change the way in which their pension benefits are accrued, where their total benefits or contributions exceed �20,000 a year. The type of additional contributions which will trigger restricted relief between now and April 2011 vary according to the nature of the scheme, and whether it is a money purchase arrangement or a defined benefit scheme. Fund Taxation Taxation Of Offshore Companies And Funds New rules have been introduced regarding the taxation of interests in offshore companies and funds. In 2008, the Government harmonised the taxation of dividends paid by offshore companies with that of UK companies, so that foreign dividends benefited from the same one-ninth tax credit that UK dividends receive, but only where shareholders owned less than 10% of the company.

This has now been extended to all shareholders, regardless of the size of their shareholding, but only for companies resident in "qualifying territories" – ones that have a double tax treaty with the UK with a non-discrimination provision. The anomaly whereby this tax credit is available to UK resident domiciliaries but not non-domiciliaries appears to survive this change. This will also apply to offshore funds structured as companies, subject to a significant exception. Where the fund derives more than 60% of its income from interest bearing assets then any distribution will be treated as a payment of interest, taxed at the full rate of income tax and the dividend tax credit will not be available. This will increase the rate of tax for holders of interests in offshore liquidity funds who have hitherto been able to claim the preferential dividend rate on their returns. Technical rules will also be introduced to clarify the capital gains tax treatment of certain non-UK fund structures (Luxembourg FCPs or Irish Common Contract Funds). As announced previously, the new definition of an offshore fund and the new reporting fund regime will apply from 1 December 2009.

Taxation Of UK Funds Currently UK authorised funds, which are exempt from taxation on capital gains, are subject to corporation tax on their income. From 1 September 2009, such funds will be able to elect to be a 'tax elected fund'. This will effectively remove the liability to corporation tax from the fund and instead investors will be taxed as if they received the income directly. This measure should improve the competitiveness of UK based funds in the international market. Classification Of Transactions As 'Trading' Or 'Investment' The classification of a transaction as 'trading', under which profits are charged to income tax, or 'investment', which gives rise to a charge to capital gains tax has not until now been set out in statute, but is governed by somewhat uncertain case law. New legislation will publish a "white list" of transactions that will be treated as non-trading transactions if carried out by investment funds. Non-UK Domiciliaries Aside from a few technical clarifications to the new rules on the remittance of income and gains introduced by the Finance Act 2008, there have been no significant amendments to the rules specifically affecting non-UK domiciliaries.

Certain exemptions relating to the remittance of property purchased with relevant foreign income have been extended so that they will apply to property purchased with foreign employment income and foreign capital gains with effect from 6 April 2008. Disclosure Following on from the 2007 Offshore Disclosure Facility, a 'New Disclosure Opportunity' (NDO) has been announced. This will provide holders of offshore accounts the opportunity to disclose details of those accounts to HMRC and settle any unpaid tax. The NDO will run until March 2010. HMRC will also seek to issue notices to financial institutions to provide information about offshore account. Naming And Shaming Plans have been announced to publish the names and details, including addresses, of deliberate tax defaulters (both individuals and companies) who deliberately under declare tax due or overstate claims or losses by more than �25,000. The legislation will be intended to catch only deliberate defaults or omissions and not errors arising from a failure to take reasonable care. HMRC will publish a list of names and details of defaulters quarterly and they will be removed after one year (assuming no further infringements). No details of deliberate defaults committed prior to the legislation becoming effective will be published.

Those who make an unprompted disclosure or a full prompted disclosure will not have their names and details published. Any person who incurs a penalty for deliberately understating tax by at least �5,000 will be required to provide more information on their tax affairs for up to 5 years to allow HMRC to monitor future compliance but will not have their names and details published unless they meet the �25,000 limit. Whether or not these rules are compatible with the Human Rights Act remains to be seen. Capital Gains Tax The annual exemption from capital gains tax for individuals will rise to �10,100 and for most trustees to �5,050. Inheritance Tax Nil Rate Band The nil rate band for inheritance tax will rise to �325,000 from 6 April 2009 as previously announced. Agricultural Property Relief Responding to a request earlier this year by the European Commission, agricultural property relief and woodlands relief from inheritance tax have been extended to cover property located in the European Economic Area, not just the United Kingdom, Channel Islands and Isle of Man as previously. These provisions are backdated to 23 April 2003.

Stamp Duty Land Tax The temporary SDLT relief on purchases of residential property of less than �175,000 was due to expire on 2 September 2009. This will now be extended to 31 December 2009, reverting to the previous threshold of �125,000 on 1 January 2010. Islamic Finance Arrangements Under provisions to be introduced in the Finance Act 2009, relief from SDLT and CGT will be available where land assets are issued as securities in alternative finance arrangements. Up until now, such tax charges had acted as a bar to using land assets in alternative finance bonds. Stock-Lending And Repo Arrangements It was announced in the Pre-Budget Report that steps would be taken to remove certain adverse tax implications which arose as a result of the insolvency of one of the parties to stock lending and repurchase arrangements. More detail of the proposed changes has been provided in the Budget announcements today. Corporation Tax Extension Of Trading Loss Carry Back For Business Finance Bill 2009 will provide companies and unincorporated businesses with more opportunity to claim relief for their trading losses against their profits of earlier tax years.

This is an extension of the one-year period announced in the Pre-Budget Report last year. The legislation which currently only permits businesses to set their trading losses against their profits of the prior year will be extended to permit a limited carry back to two further years for a limited period. Unlimited losses can be set against profits of the prior year and, if there remain unutilised losses after this set-off, up to �50,000 can be carried back a further two years. This will apply to companies with accounting periods ending between 24 November 2008 and 23 November 2010 and to trading losses made by unincorporated businesses in the tax years 2008-2009 and 2009-2010. Foreign Dividend Exemption A general tax exemption will be introduced from 1 July 2009 for receipts of foreign dividends by UK companies. There will be certain exempt classes of dividend and certain anti-avoidance rules will also apply but, in principle, all dividends paid to UK companies by non-UK companies will in future be exempt from UK taxation in the hands of a UK company.

It was originally proposed that a 10% minimum shareholding requirement be imposed in some situations but it seems that this restriction has now deliberately been removed. In association with the introduction of this general tax exemption, certain changes will be made to the taxation of controlled foreign companies and also to the tax-deductibility of corporate debt. As regards the latter, there has never previously been any particular restriction on the tax-deductibility of a company's interest costs (other than under transfer pricing rules or where special anti-avoidance rules applied). But a general restriction on tax-deductibility of interest will now apply in certain situations, based upon a rather complex formula that is designed to prevent a UK company's interest deductions exceeding the total funding costs of an international corporate group of which it is a member. Personal Responsibility Of Company Officers For Corporate Tax Compliance In future, the senior accounting officers of large companies will be obliged to take reasonable steps to establish and monitor accounting systems to ensure that they are adequate for accurate tax reporting. The relevant officer will have to certify annually that a company's systems are adequate in this respect, specify any inadequacies and inform the company's auditors of these.

Penalties for noncompliance will be imposed on both the company and on the accounting officer personally. Offshore Financial Centres As announced in the 2008 Pre-Budget Report, the Government commissioned a review into the longterm opportunities and challenges facing the British Crown Dependencies and Overseas Territories as financial centres (Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Guernsey, Jersey, Isle of Man and Turks & Caicos Islands). An interim progress report was issued today which highlights the discussions that have taken place to date. This progress report does not itself make any recommendations, but does note the increased pressure on such financial centres to implement agreed standards for the exchange of information and that 'it will be important for the financial centres covered by this Review to be able to respond positively to the emerging consensus'. No doubt the final report will increase the pressure on offshore financial centres to follow through on the commitments that have already been made in this regard. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. To print this article, all you need is to be registered on Mondaq.com.

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If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly. Budget 2009 - Immediate Reactions - Tax - UK Connections at Firm Comment by Sally Grimwood, Tax Director, Deloitte Headline news from this Budget is the tax rises for higher earners from April 2010. From that date: The tax rate for those earning more than �150,000 will be 50% (not 45% from 2011, as announced in the PBR). The personal allowance will be withdrawn from those earning more than �100,000 (not halved and then withdrawn from 2011, as announced in the PBR). That represents a cost of �220 per month for those affected. It's hard to see ways to shelter income from the 50% tax rate as there are also restrictions on pension contributions from April 2011 for those earning more than �150,000 - see the section on individuals below for more information.

Click here for HM Treasury's costings of each of the changes announced in the Budget - see Table A1 on page 160 (or page 153 as numbered). It's a good way to see the winners and losers at a glance. What's noticeable this year is that the scale of wins and losses is smaller than for past Budgets and PBRs - although when it comes to personal tax rises do read the footnotes at the bottom because the figures in the table itself don't take account of the changes already announced at PBR 2008. It's clear that when you add PBR 2008 to Budget 2009 then higher rate individuals are paying a whacking �7 billion additional tax per year. The rest of the measures might grab headlines but don't add up to that much. The key measures for corporates The big news on Foreign Profits is that we finally have a commencement date - the exemption for dividends starts from 1 July, and the worldwide debt cap will apply to accounting periods beginning on or after 1 January 2010.

Our view is that the dividend exemption is largely fine but that the worldwide debt cap still has problems, so the deferral of the worldwide debt cap is appreciated. Note also that the extension to anti avoidance on interest deductions has disappeared. What we don't have is new legislation, and we're not expecting any until the Finance Bill is published on 30 April. Even then, we know that not all the legislation will be included in the first draft Bill as HMRC has already said that more will be added at the Committee stages. Most people will be glad to know the deadline to take action, but may want to hold fire on analysis until the legislation is out. We now have SOX for Tax. Financial officers of large companies (basically those not defined as small or medium in the Companies Act) will be required to certify annually that their accounting systems are fit for tax purpose... and the critical question is how the CFO can get comfortable with their accounting systems and any assurances given to the CFO by the head of tax. Two measures relating to intangibles are worth a look. First, the government will be consulting on the taxation of IP in general terms, with the vaguest hint that the Treasury might be considering a "royalty box" type regime.

This is a great chance for companies to influence future policy, so give though to what you want to see. On the other hand, there is a retrospective change to the taxation of goodwill arising on intragroup transfers, putting beyond any doubt that the Revenue won't accept that such transfers create a new tax deduction. The Chancellor announced the doubling of capital allowances to 40% for the current tax year. This will be of absolutely no benefit to those making losses, and worth very little to the profitable because the net present value is next to nil. Finally, it looks as though pension contribution relief for corporates remains unrestricted, even though 50% individual taxpayers will find their relief restricted. There will be measures put in place to prevent employers making salary sacrifice pension arrangements for those 50% taxpaying people. The key measures for entrepreneurial businesses The 3 year �50k loss carry-back has been extended by a further year. As it's only worth c.�10k in cash tax for most businesses, it's nice enough but not nearly big enough to make a significant difference. On the plus side, the Chancellor confirmed the Business Payment Support scheme will be extended.

100,000 taxpayers in financial difficulties have deferred �1.8 billion across all the taxes, and the extension beyond the current six month limit is much welcomed. We can help clients to apply for deferrals under the BPSS, and also help them improve their cashflow so that they can pay their tax when the deferral ends. The key measures for VAT and Indirect Non-specialists: don't panic if you can't spot any interesting announcements in the VAT area - it's because there's nothing interesting to spot! Most importantly, we have not seen an increase to the VAT rate to 18�% as had been widely predicted. Specialists: there are some specific niche areas worth a look, and the Press Notices are here . The key measures for individuals From April 2011 tax relief for pension contributions will be restricted for those earning more than �150k, tapering to the same 20% level of relief as is enjoyed by basic rate tax payers. That could seem particularly harsh when you consider that a 40% taxpayer (e.g. somebody earning �100k) will still enjoy full relief.

Further, it makes no sense for people nearing pensionable age to make contributions relieved at 20% if they're expecting to receive a pension in a couple of years' time that's taxable at 50%. It also looks like you won't be able to prefund your pension scheme this year, before the tax rate increase to 50% kicks in, and will have difficulty switching from employee to employer contributions. As has been widely flagged in advance, the Stamp Duty Land Tax threshold extension from �125,000 to �175,000 will continue to the end of this year Extension of the SDLT threshold by 3 months. This will help perhaps 9,000 purchasers per month in pretty much all regions of the UK (other than London and the South East, where the average house price is still more than the limit), and will cost the Treasury c.�100 million. Obviously this will only be of interest to those looking to move. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. To print this article, all you need is to be registered on Mondaq.com.

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If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly. Budget 2009: Income tax hike for high earners - Employee Benefits Employee Benefits Budget 2009: Income tax hike for high earners 22nd April 2009 3:45 pm 3rd November 2015 6:22 pm In his 2009 Budget report Chancellor Alistair Darling announced a sharp increase in income tax for high earners. Employees that earn more than £150,000 a year will pay income tax of 50%. This will be enforced from April 2010. The change contrasts to the hike in income tax to 45% for high earners that was announced by the Chancellor in his pre-Budget report in November 2008, which the government had planned to introduce in 2011.

In addition from 2010/11 the basic personal allowance for income tax will be reduced for those with an adjusted net income above £100,000. This means that the amount of the allowance will fall by £1 for every £2 above the income limit. The Chancellor introduced the measures as part of efforts to reduce government borrowing to £261.2bn by 2013-14. In the Budget report the chancellor said: “Over the medium-term the Government’s fiscal policy objective is to ensure sound public finances and that spending and taxation impact fairly within and between generations.

Building on the significant fiscal consolidation announced in the 2008 Pre-Budget Report, this Budget sets out tax and spending measures that reduce borrowing by £261.2 bn by 2013-14.” 22nd April 2009 4:14 pm 3rd November 2015 6:22 pm 21st April 2009 11:29 am 3rd November 2015 6:19 pm 22nd April 2009 2:45 pm 3rd November 2015 6:22 pm 23rd April 2009 4:45 pm 3rd November 2015 6:22 pm 22nd April 2009 4:00 pm 3rd November 2015 6:22 pm 18th January 2017 3:24 pm 18th January 2017 3:24 pm 18th January 2017 3:11 pm 18th

 January 2017 3:11 pm 18th January 2017 3:05 pm 18th January 2017 3:23 pm 18th January 2017 2:45 pm 18th January 2017 3:04 pm Anonymous 23rd April 2009 at 10:22 am The Chancellor has increased the proposed top rate of income tax, on those earning over £150,000, from 45 per cent (as announced in the 2008 Pre-Budget Report), to 50 per cent.

The new rate has also been brought forward, coming into effect in April 2010 (in place of April 2011), breaking Labour’s manifesto pledge not to increase the basic or higher rates of income tax in this Parliament. In addition, from 2010-2011, the personal allowance for income tax will be gradually reduced to nil for individuals with incomes above £100,000, as opposed to the two-stage reduction announced in the 2008 Pre-Budget Report. Nigel May, Tax Principal at chartered accountants and business advisers, MacIntyre Hudson comments: “The Government’s singular attack on the wealthy has created a situation in which top earners will be working more for the Government than they are for themselves. This move will also create a system of crippling marginal tax rates which we have not seen for a generation. Considering the ease with which top talent can migrate around the globe to countries with more favourable tax regimes, the Chancellor is seriously gambling with the attractiveness of this country as a place to do business. “For those earning over £100,000, their personal allowance will be reduced by £1 for every £2 above the income limit.

The Chancellor is introducing an effective marginal tax rate of 60 per cent for those earning between £100,000 and approximately £112,000 a year. This is made worse if you take into account National Insurance. The proposal in the Pre Budget Report for a two stage removal of the personal allowance when income reached £100,000 and then £140,000 a year, made a graph of our marginal tax rates look like a side-view of Battersea power station. Today’s revision has simply demolished one chimney and pumped up the other! “All in all, in a Budget where the Chancellor is primarily pinning our turnaround on optimistic forecasts for future growth, taxing the rich is an easy political move, the effectiveness of which in boosting the Treasury coffers is questionable. Alistair Darling has sought to throw down the gauntlet to the Tories to oppose the increase, and side with the country’s wealthy. But he may have done better to hang on to his armour.

In a Budget that was all about credibility, it may be hard for Darling to shrug off the broken manifesto pledge while our economy remains so finely balanced.” 23rd April 2009 at 10:27 am Nigel May, Tax Principal at MacIntyre Hudson, comments: “The Chancellor has confirmed by his silence that Employers’ National Insurance Contributions will rise as planned by 0.5% in April 2011. What happened to the “Budget for Jobs”? This represents a rise in the nearest our system has to a tax on jobs, planned to come in just as unemployment reaches a new peak somewhere over 3 million.” Anonymous 23rd April 2009 at 10:28 am Commenting on today’s announcement Chris Blundell, partner in the employment tax services team at international accountancy firm Mazars says: “The new 50% tax rate for individuals earning in excess of £150,000, effective from 6 April 2010, is a significant shift upward form the previous announcement of a 45% tax rate from 6 April 2011.

For large companies operating internationally, this will mean a huge hike in the cost of seconding individuals to the UK on net pay schemes from what is currently £1.67 for every £1 of net pay to £2.00 for every £1 of net pay – an increase of 33p for every £1 of net pay. This, together with the loss of the personal allowance previously announced, will lead to a colossal increase in costs where an organisation tax-equalises individuals seconded to the UK. Further combining these costs with the high cost of living could significantly affect an organisation’s decision to send individuals to the UK. This is likely to lead to an increase in the number of companies now looking to use more favourable tax locations in which to base their talented individuals such as Hong Kong, Dubai or Switzerland. Even for those individuals coming to the UK on local terms, the marginal tax rate for individuals earning in excess of £150,000 including the projected increase in national insurance from 6 April 2011 will now be 51.5%. Again, they will also not benefit from the UK personal allowance which will cost them a further estimated £2,500.

These measures rather than encouraging inward investment, will more likely accelerate a brain drain to other economies. There has also been an announcement to end the use of premium leases as a way to reduce the tax on accommodation provided by employers for individuals moving to the UK. Now, it will be necessary to pay tax and national insurance (where applicable) on the full market rental value adding still more costs to individuals relocating here.” Anonymous 23rd April 2009 at 10:30 am “We support the Chancellor’s moves to make the tax system more progressive by increasing the top rate of tax to 50%, restricting personal allowances and pension tax relief for high earners and increasing efforts to reduce tax avoidance.

It is only fair that higher earners – who have seen their relative incomes increase over the last decade – should pay more, rather than the less well-off.” David 11th October 2009 at 11:09 am Restricting tax relief on pensions to 20% and then still taxing penson when paid at 40%/50% seems pretty odd to me and will act as a deterrent to pension saving- much better to stop tax free tax being drawn at retirement which is abused by the rich as they apporach retirement- they put in money and get tax relief and then draw it out soon afterwards when they retire tax free=but then so much of the public sector senior Treasury civil servants might lose out I suppose they wouldn’t put that forward would they!

Question: The 2009 UK budget announced what tax rate (effective April 2010) for earners of more than £150,000 per year?
Answer: 50%