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Income tax changes

As we touched on in one of our earlier post, yesterday's budget was very much a political statement by the Labour Party and an attempt to sway favour from historic Labour supporters. The 50% income tax rate to be applied to those earning over £150,000 a year, from next April, will raise very modest amounts (if any extra) of tax for the Treasury although it is very much seen as "payback time" for those who have prospered during the last UK boom.

Interestingly, there was no mention of the ten pence income tax band which Gordon Brown introduced last year only to cancel it and agree to compensate those affected. There are significant concerns within the Labour Party that many of those promised assistance after the ten pence tax band was withdrawn have yet to receive any financial compensation from the government. This may be an issue which is highlighted in the next general election and could prove a very interesting subject for the Tory party to challenge.

On the whole, aside from those earning over £150,000 a year, the Chancellor of the Exchequer had very little room for manoeuvre in this year's budget even if he had wanted to increase tax income for the Treasury. However, it will be a very different story in 2011 and beyond when the next government will be in power and be given a period of grace before the next general election.

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