George Osborne claimed to cut the top rate of tax in the budget.
But he didn’t. He made a new one.
He announced that for families with child benefit with a person earning between £50,000 and £60,000 in the household 1% of the benefit would be earned for every £1oo earned over £50,000
Child benefit is paid this year at the rate of £20.30 for the first child and £13.40 for each additional child.
Now let’s take a family in this income bracket with two children. For each £100 earned they will pay £40 in tax. And they will lose £17.52 (on a 52 week basis) of child benefit. That’s a tax rate of 57.5%.
Try a 4 child family and the rate goes to over 71%.
Of course some on around £10,000 suffering benefit withdrawals because of the increase in the personal allowance will also suffer this sort of marginal tax rate as well. But ket’s be clear, George did not get rid of the highest rate of income tax in this budget, he made a new one.
Curiously, the IFS says 48% is the highest optimal rate of tax in the UK. Candidly, their logic is based on fantasy land maths, but instinctively I have a gut feeling anything much over 50% is high. However looked at a large swathe of families right in the ‘hard working families’ bracket where incentives to work are meant to have a big impact are now going to be suffering a rate much higher than that.
Well done George! And all for the sake of your dogma driven wish to get rid of universal beenfits.
They’ll thank him even less when they realise that they now have to do tax returns and refund this case – which they’ll have spent – at the end of each year too. Oh, what a fine mess George can make.