16 Mar 2012

Osborne set to scrap 50p tax rate

Chancellor George Osborne is rumoured to be preparing to cut the 50p top rate of tax in next week’s budget.

According to The Guardian, Mr Osborne is set to push ahead with a reduction in the 50p rate after analysis found the levy is reaping substantially less for the exchequer than expected. But Downing Street said the claims that the levy on earners over £150,000 would be reduced to 40p were “speculation”.

Tory MPs will welcome the move, but the Conservatives’ coalition partners are adamant that if the 50p rate is scrapped, there must be other taxes on the rich.

Negotiations between the two parties will culminate with a meeting of the so-called Quad on Monday. Prime Minister David Cameron, Chancellor George Osborne, Deputy Prime Minister Nick Clegg and Treasury Chief Secretary Danny Alexander will meet two days before Mr Osborne stands up in the Commons to make his budget statement.

The Lib Dems want to ease the burden on the poorest by raising the income tax threshold. Mr Clegg has talked about a “tycoon tax”and there is also support for a so-called “mansion tax”.

Details of the government’s statement are set to go to the Office of Budget Responsibility (OBR) to allow the independent body to work out its official forecasts.

50p tax rate may be losing government money

A preliminary study, due to be published next week, is to show the tax on the highest earners is bringing in hundreds of millions, not the £2.6bn predicted, the newspaper said.

One industry that is set to benefit from next week’s statement is high-end television production.

Companies could benefit from a tax break worth tens of millions of pounds a year under plans expected to be announced in the 21 March budget.

The chancellor is expected to announce a consultation on extending to cinematic-style TV production the existing tax relief worth £100m a year to the UK film industry.

Coalition could scrap 50p tax rate