Did the Chancellor mislead the house?
Posted by James Burdett on May 13, 2008
Just looking at the statement that Alistair Darling gave to the house of Commons today in which he announced that the threshold for higher tax would be reduced and said “I am therefore reducing the threshold at which an individual starts to pay tax at the higher rate by £600.” However when one looks at the HMRC press release it states something different and says “To reduce the higher rate threshold as announced by the Chancellor, the basic rate limit will be reduced by £1,200 from £36,000 to £34,800.” The press release then states that higher rate taxpayers will not lose out. Now my maths might be slightly dodgy here but the tax free threshold goes up by £600 so as the basic rate is 20% that is a saving of £120 in tax. However if the 40% threshold is lowered by £1200 pounds then that means that an extra £1200 is charged at 40% tax equating to £480 less the £120 benefit of the tax free threshold so higher rate taxpayers will be worse off to the tune of £360 pounds it seems, or about 99p a day worse off. Please someone correct me if I am wrong.
Somewhere along the line someone was being misleading. Also when did we become customers of HMRC? Can we withdraw our custom?
Update:- Just looked at the tax bands for 2007/08 and the 40% rate kicked in at 34,600, as a result of the budget that was indexed up to 36,000. From the press release today the level has been bought down again to 34,800 all but cancelling the indexation in the budget. This is major fiscal drag and will trap new people in higher rate tax.
Update 2:- Having looked again at a simple tax calculator it appears that the £1200 difference does mean that higher rate tax payers get no benefit from the increased personal allowance, however the point stands that Darling said that the Higher rate threshold was being reduced by £600 not £1200.
