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UK’s top income tax rate payers double in three years; UK must strengthen EU trade deal, says business group

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6 months ago

June 28, 2024

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UK’s top income tax rate payers double in three years; UK must strengthen EU trade deal, says business group

The number of people paying the top rate of income tax in the UK has more than doubled in the past three years, according to HM Revenue & Customs, as a result of the government’s decision not to raise income tax thresholds in line with inflation.

The number of higher-rate taxpayers — who pay tax at 40 per cent on annual earnings above £50,271 and below £125,140 — is expected to increase by over 40 per cent between 2021-22 and 2024-25, according to HMRC projections.

Laura Suter, director of personal finance at investment platform AJ Bell, told the Financial Times that the freezing of tax thresholds in 2021-22 had led to “a huge jump in the tax take for the government”.

Neither the Conservative government or the Labour party have indicated they will reverse personal income tax threshold freezes in the next parliament.

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The head of the UK’s largest business organisation has urged the next government to expand upon the country’s trade and co-operation deal with the EU to boost economic growth.

“We must stop walking on eggshells and start saying it how it is. The current plan isn’t working for our members,” said Shevaun Haviland, director-general of the British Chambers of Commerce at the group’s annual international conference in London on Thursday.

The UK’s Office for Budget Responsibility has said that the UK’s exit from the EU will cause a 15 per cent reduction in UK trade and cause a 4 per cent hit to UK GDP in the long run.

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UK think-tank the Institute for Fiscal Studies has criticised Labour and the Conservative plans to improve public services as “essentially unfunded”, claiming that the parties had “hidden and ducked” hard economic choices ahead of next week’s election.

“On July 4, we will be voting in a knowledge vacuum,” said Paul Johnson, the IFS’s director, who said that the next government faced a stark choice between raising taxes beyond manifesto pledges or cutting spending further.

The IFS also criticised parties’ competing pledges not to raise taxes, thereby ruling out ways to raise extra revenue.

These so-called “tax locks” “will constrain policy if a future government decides that it does in fact want to raise more money to fund public services”, and also put “serious constraints on tax reform”, Johnson said in a statement on Monday.