Tax for higher earners not clear

29/06/2010

The UK Chancellor, George Osborne, has been accused of failing to properly explain the implications of his tax changes to higher earners.

It has been announced that the tax-free personal allowance for under 65s will increase by £1,000 to £7,475 as of next April. Although he told higher earners that this will not benefit their taxation, he failed to tell them up-front that their 40 per cent tax rate will actually kick in once they have earned £42,375, down from £43,875, which is where the higher rate currently begins.

Many high earners have decided to relocate offshore to save on their tax bill in recent years. Some have also relocated their company registration to countries like the British Virgin Islands or Gibraltar to reduce their corporation tax bills.

Osborne has been criticised by officials from Deloitte and from the Chartered Institute of Taxation, which said that the personal tax issue was not "overly spelt out". Deloitte’s tax director, Nicola Robertson, added, “While the Chancellor said higher-rate taxpayers won’t benefit from the increase in the allowance, what he failed to say was they are actually going to be worse off.”