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Will the rich in the UK really pay the 50% higher tax rate?

Sometime ago the Labour government decided that the best way to give itself a fighting chance at the next election was purely and simply to tax the rich and attack the banking community. As a consequence we saw the introduction of the 50% tax rate on income over £150,000 a year which the government initially forecast would raise in excess of £1.1 billion in additional revenue per year. However, City Minister Lord Myners has today stepped forward to confirm this figure has been revised downwards although no replacement figure has been released.

Finally it seems that the UK government now appreciates the fact that those caught in the higher tax band will do everything they can to maintain their lifestyles and reduce their tax liabilities. Unfortunately, they will also refrain from potentially high-risk investments which will impact on the UK economy in the medium to longer term. All in all, those who were expected to present the UK government with extra tax revenue on income over £150,000 will make use of all legal tax reduction schemes or indeed, as many have hinted, potentially move overseas.

It will be interesting to see exactly what additional income the 50% tax band brings in and whether it is anywhere near the £1.1 billion widely reported in the press.

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