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So Mr Osborne is the devil in the detail?

Despite opening his budget speech yesterday with a promise to be transparent and up front about all changes it would appear that George Osborne has quietly lowered the threshold at which the 40% income tax rate kicks in. It is now estimated that 700,000 more people in the UK will be dragged into the 40% tax band and see their income tax bills increase for the foreseeable future.

On the surface the higher tax band rate has been reduced by £1,500 and will now become an issue for those earning above £42,375 as opposed to the £43,875 level only 24 hours ago. However, when you also take into account the £1,000 increase in the personal tax free allowance then effectively the level at which 40% income tax will begin has been reduced by £2,500. It was also revealed that these allowances will be frozen for three years which will effectively pull more and more people into the higher tax band simply by the fact that their incomes are unlikely to remain unchanged for three years.

This particular method is referred to as "fiscal drag" and is not something we would have expected to see especially, after George Osborne promised a new era of transparency with "no smoke and mirrors".

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