High earners who make contributions to their pensions in the next tax year are set to benefit from the introduction of the 50% tax rate.
The Treasury confirmed today that people earning £150,000 or more, who will be paying the new marginal income tax rate of 50% from April 2010, will also benefit from 50% tax relief on any contributions they make to their pension. For one tax year only, for every pound they pay into their pensions they will save 50p in tax.
But it now seems the changes will backfire on the government in a move which could cost the exchequer the £1bn it hoped to raise from introducing the tax rate.
Isn\’t that amusing?
Even the government is now saying that there might not actually be any revenue raised by increasing the tax rate?
(It has to be said as well that the print version of this is rather stronger. "a move which could cost the exchequer up to £1.5 billion".)
Of course, we\’ve been told that any shortfall in the projections from this 50p tax rate could only possibly be because the rich bastards aren\’t paying their debt to society.
It couldn\’t possibly be as a result of their using the provisions in the tax code which Parliament specifically puts there for them to use, oh no siree.
Richie Boy will be popping up saying that paying more into a pension or working for less time than possible is evading taxes.
He will then propose his general anti-avoidance provision that not working full-time is deemed to be cheating the state out of the taxes it would have got, and penalties must apply.
You know, an LVT and no income tax (after all working IS contributing to society (at least in the mutual reciprocation sector)) would sort this out.
Well, unless you have a final salary scheme, in which case one of the HMRC options is:
Pay rise £6,000. Increase in imaginary fund to finance 2/3 of that, ie £4,000 pa @5% is £80,000. Tax thereon 30% = £24,000. Or 400%. A tad high methinks, even for a Labour tax rate.