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Those affected by new 50% tax band could double in 10 years

In a move which many in the markets have missed it was revealed that Alistair Darling has no plans to increase the £150,000 level at which 50% tax applies in the future. Usually, as we have seen in the past, tax allowance bands are increased in line with inflation reflecting the relative value of wages in the future compared to now. However, as the Treasury has no plans to increase the £150,000 level slowly but surely more and more people will be brought into this particular tax group.

Alistair Darling himself has estimated that 300,000 people will fall into the 50% tax band immediately although accountants believe the figure will rise to around 750,000 people over the next decade. This is sure to increase the number of businesses, business people and entrepreneurs leaving the UK over the coming years with taxation becoming a particular issue for many.

It is also interesting that we have seen a number of well-known political supporters ditch the Labour Party over last few days which will inevitably lead to reduced funding head of next year's general election. While the government had very little option but to try and differentiate itself from the opposition parties, the "tax the rich and help the poor" policy now being pursued could have serious drawbacks in the short, medium and longer term.

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