Budget 2009 - pants

So, we have a new 50% income tax rate to be imposed, with effect from 6 April 2010, on those with a total taxable income of £150,000 plus.  By our estimation, there can be no more than a meagre 200,000 such individual taxpayers (and, say, another 250,000 trustees, many of whom will be a long way of the income threshold but stuck with the 50% rate regardless). 

All told, the UK could tax these people at 100% and it would still make not more than the slightest of dents in the parlous state of the Treasury coffers.  It can only be viewed as a tragic shame that, at a time when many, including the seemingly unappreciated SME sector which makes up the rump of the taxpaying populace, are in desperate need of major help, all they get is this feeble minded and ineffectual political headline grabbing. 

The move seems to be inspired by the creation of a short term political agenda for the run up to the next general election.  Whilst this would be in keeping with the government's track record of abusing its legislative mandate, one cannot help but wonder whether, this time around, the dynamic duo of the Pilsbury Dough Boy and Boy George will get their act together sufficiently to use this initiative to hang their opponents. 

The Tories adopted the authoritarian left wing line with the non-dom fiasco and, privately at least, it is now thought that this was a mistake with some now thinking that the dubious estimate of £4BN extra tax at stake is now less than a tenth of that. They might, on this occasion, feel that they can afford to ride out the "friends of the rich" tag and, instead, look to restore some semblance of credibility to the UK on the international scene by announcing their intention to restore immediately the 40% top rate as a manifesto promise.   The figures could easily be squared off with a more rational and politically justifiable  rise in the flat rate of capital gains tax to 25% or 30%.

In passing, the UK's shiny new 50% top tax rate is bettered only by Denmark, Sweden and the Netherlands.  The USA headline rate is 35% and the world average rate is just shy of 30%.  

It is apparent that, away from the cheap headlines, there is going to be a fair amount of work needed on the detail of the many announcements tucked away in the releases.  There will, doubtless, be more which surface only when the Finance Bill is published.  For instance, the  HMRC Budget Notes are silent on the topic, but the Budget Report (at A.41 on page 160) signifies the  intention to aboliish the Funrnished Holiday Letting rules.

There is little point in running through the new tax rates etc., as this information is readily available from the more generalist sites such as AccountingWeb or Accountancy Age. We will, instead, write a few items here on some chosen topics, and on the Finance Bill generally when this is issued.