The increase in higher-rate taxpayers is being attributed to reductions in the threshold for the forty percent tax, combined with the “fiscal drag” which sees tax bands staying where they are, instead of moving up with inflation, which results in inflation-linked wage increases pushing more people into the higher rate tax bonds.
John Whiting, from the Chartered Institute of Taxation (CIOT): “The combination of that happy couple, fiscal drag and cuts in the higher rate threshold, is pushing more people into the higher rates where they can contribute more to cutting the deficit.”
However, a spokesperson for the Treasury has argued that the higher rate tax threshold remains the same as last year; adding: “The increase to the personal allowance in 2012-13 has not created new higher rate taxpayers, although there will be some people whose income increases over the two years, meaning that they move into the higher rate.”
Although the number of higher-rate taxpayers has been estimated to increase over the next year; figures from the tax office have also revealed that the total of taxpayers during the financial year is set to decrease to fewer than thirty million.
The drop in taxpayers is due to the lowest paid being removed from the tax system altogether following an increase in personal tax allowance.
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