50% income tax
Having your cake and keeping it. Planning in advance of 5 April 2010
An increase in the top rate of personal income tax for all income above £150,000 was announced in the 2009 Budget. The new 50% rate will be in force from April 2010. This is a significant increase (and an increase in the original announcement made in the Pre Budget Report in November 2008 that the rate would be 45% as of April 2011) and also represents a structural change to the tax planning landscape.
The new rate is born against a backdrop of fiscal uncertainty in an election year, and it is fair to say that it is not expected to come down in the short to medium term. Added to this, it is ever more critical to ensure tax compliance is strictly adhered to as revenue authorities are extremely aggressive in their approach to information gathering. This has been clearly demonstrated by the huge political pressure on traditional tax haven jurisdictions, the number of Tax Information Exchange Agreements signed this year ( to date) and double tax treaties entered into, as traditional havens of privacy struggle to meet the OECD grey and whitelist.
Despite a number of uncertainties, the 50% income tax rate is coming and will be upon us sooner rather than later. This requires a structural change to tax planning, to ensure that robust, practical and sensible planning is put in place, sooner rather than later, to ensure maximum tax efficiency.
The new rate, and other changes announced in the 2009 Budget, means that it is paramount that employees and investors carefully consider their tax position and liaise with employers and their advisers to explore what planning can be effectively put in place now to help mitigate or defer the upcoming increased income tax liabilities. Click here for further information on how to plan for the higher rate.
For more information on the bank bonus supertax, as announced in the Pre-Budget Report on 9 December, please click here.
