Accountants Warn Against UK 50 Percent Income Tax Rate 

High earners in the UK would pay 24 percent more tax than the current global average if the Labour Party succeeds in reintroducing the 50 percent tax rate, according to international accountants UHY Hacker Young.

According to the firm, the higher rate would increase the tax burden on an individual with an income of USD1.5m (GBP876,915) by USD62,172 (GBP36,245). High earners would take home just 50.1 percent of their income after tax and National Insurance contributions (NICs).

Between 2011 and 2013, the 50 percent rate was charged on all income over GBP150,000 (USD240,000). The opposition Labour Party has pledged to reintroduce the rate if it wins the 2015 general election.

UHY Hacker Young studied tax data in 25 countries across its international network. Taking into account personal taxes and social security contributions, the survey captured the take home pay for low, middle, and high income workers. High earners were defined as those earning USD1.5m a year. The calculations are based on the model of a single, unmarried taxpayer with no children.

UHY estimates that workers earning USD1.5m a year are USD67,637 better off as a result of the Coalition Government’s decision to scrap the 50 percent rate from April 2013. However, take home pay for high earners is still USD67,637 (GBP39,545) higher than the average in Western Europe.

The survey found that Belgium taxes high earners the most, with Belgian taxpayers taking home just 46.31 percent of their pay. The UK ranks 14th in UHY’s list of 25 jurisdictions, with workers taking home 54.21 percent of their pay. If the 50 percent rate was reintroduced, the UK would have the eighth highest burden, just behind Ireland and Spain.

The global average tax burden on earners earning USD1.5m is 59.87 percent, while the Western European average is 49.7 percent.

Mark Giddens, Partner at UHY Hacker Young, said: “The UK Government reduced the 50p tax rate in April last year on the basis that this would encourage wealth creation and prevent a brain drain of skilled professionals. Reintroduction of the 50p tax rate could be something of a backwards step at a time when other countries are rolling back their top rates of tax and could put the UK at a significant disadvantage to its rivals.”

“We would lose some of the edge that we currently have over other western European countries in attracting successful entrepreneurs and investors. We will also find it harder to compete against other major English-speaking economies such as the US, where high earners already take home an extra USD48,300 compared to the UK.”

Source: taxnews- Accountants Warn Against UK 50 Percent Income Tax Rate

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