01-30-2008, 06:38 PM
Joined: Aug 2006
700,000 CAUGHT IN THE BROWN SNEAK TAX TRAP
Quote:700,000 CAUGHT IN THE BROWN SNEAK TAX TRAP
Wednesday January 30,2008
By Gabriel Milland
Hundreds of thousands of families have been dragged into a stealth tax trap by Gordon Brown.
Around 3.7 million people are expected to pay income tax at the top rate of 40 per cent this year a rise of 700,000 in five years.
More are paying the higher tax because Labour has failed to raise the threshold at which it starts to be paid in line with wage inflation.
Accountants UHY Hacker Young said the failure would cost each top rate taxpayer more than £700 a year.
The vast majority who have moved into the higher tax bracket have quite modest lifestyles, said Roy Maugham, a tax specialist at UHY.
Just like inheritance tax the Government is content to see those on relatively modest incomes get caught by a tax meant to target the rich.
This year the wage level at which income tax stops being paid at 22 per cent and starts at the higher tax bracket will be £34,600.
Mr Maugham added: The cumulative effect has seen a dramatic rise in the number of people paying the higher rate of income tax.
The increase is not attributable to a rise in the number of millionaires.
Professionals such as a deputy head teacher at a primary school or a sales manager at a small firm are some of those caught by the higher rate. Savings and other income also have to be paid at 40 per cent.
The figures released by HM Revenue & Customs as part of its annual income statistics show that the number of basic rate taxpayers has grown by a million from 22 million in five years a rise of 5.4 per cent.
But the number of top-rate taxpayers has grown by more than 20 per cent.
Wages have risen by 20.8 per cent over the same period but the threshold at which the higher rate takes effect has risen by just 15.7 per cent. The extra 700,000 caught by the top rate will pay £493million into the Treasurys coffers this year, according to UHY Hacker Young.
Matthew Elliott, chief executive of the TaxPayers Alliance, said: People are getting tired of the Government playing the system to squeeze more and more money out of taxpayers.
Their repeated failure to raise thresholds in line with inflation and growth is a stealthy trick to exploit ordinary families.
For too long, Gordon Brown has seen this as a clever wheeze to fill the Treasurys coffers and it does not seem to care about the severe pressures put on people by unsustainably high taxes.
A study published by the TaxPayers Alliance this month found that all families are being ripped off by an average of £550 a year by the Prime Ministers failure to raise other tax thresholds in line with inflation.
A Treasury spokesman said the Government was following precedent by raising the the tax threshold in line with price inflation.
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