An additional 44,000 West Midlands taxpayers are likely to end up in the higher rate tax bracket by the end of the current financial year – according to calculations by a leading Birmingham-based finance specialist.
Accountants Haines Watts, which specialises in servicing owner-managed businesses and SMEs, has warned that many business people could be worse off because the starting level for the top rate is being pushed down by a combination of economic circumstances.
Nationally, it is estimated that an additional 4.3 million people will become higher rate tax payers – up from just over three million in 2010/11.
“It’s reckoned that nearly one in six workers will become higher rate tax payers by April 2014 – compared with one in 20 in the 1980s,” said Darren Holdway, a partner with Haines Watts.
The Institute for Fiscal Studies thinktank has estimated the figure could go as high as five million over the next three years, because the starting point for paying 40 per cent is to come down by one per cent each year. Subsequent annual pay rises will push workers earning just below the limit into the higher band.
“The starting point for 40 per cent tax is being pushed down – while wages are likely to be pushed up. In the past, limits have risen in line with inflation which takes into account the cost of living and on average, salary increases,” claimed Mr Holdway. The Association of Chartered Certified Accountants added that by lowering the starting point for 40 per cent tax even new entrants into the jobs market, and many more pensioners, will be entering a tax band once seen as the preserve of the wealthy.