Top-rate taxpayers in UK on course to double since 1995

By the time voters next go to the polls in 2015, the number of higher-rate taxpayers in the United Kingdom will have doubled in 20 years, following chancellor of the exchequer George Osborne’s budget changes on Wednesday.

An extra million people will have been dragged into the 40p rate by 2015 because of Mr Osborne’s decision to increase income tax thresholds by just 1 percentage point, the respected Institute of Fiscal Studies declared – bringing the total to five million.

Next year, people earning more than £41,450 will start to pay 40 per cent on the excess.

In 2014, more than 200,000 more will be dragged into the top rate when the threshold rises to £41,865, far below what is needed to cope with inflation, while a further 180,000 will follow in 2015 when it goes to £42,285.

“The higher rate is no longer something faced only by the highly-paid few,” said institute director Paul Johnson, who said Mr Osborne had cut incomes for the richest and poorest, while giving a little to pensioners and low-paid workers.

It warned that billions in extra cuts will follow the 2015 election, because the chancellor will not be able to meet his spending targets: some government departments will be faced with 2015/16 budgets which will be a third smaller than in 2010.

“[The chancellor's target begins] to look close to inconceivable. Further welfare cuts and tax rises must be on the cards. £27 billion worth would be required to protect other spending in real terms,” Mr Johnson declared.

The Public Commercial Services union called for a national campaign for a £1,200 pay rise for all public staff, or 5 per cent, whichever is higher; along with an end to cuts in working hours, holidays and flexible working.

Labour’s shadow chancellor Ed Balls gave the strongest hint yet that Labour will oppose a Commons vote needed to approve plans to increase welfare benefits by just 1 per cent a year for the next three years.

“The test for me will be, is this hitting working families and low income, does it lead to rising child poverty and is it fair for him to take billions from low- and middle-income families when he’s spent £3 billion next April on a tax cut for people over £150,000,” he said.