Nearly a million people face soaring rates of tax as the government’s deficit reduction plan continues this spring.
James Brownie of the IFS warns that the number of high earners could continue to grow as a result of the Conservative’s concession to the Liberal Democrats to increase the tax free allowance to £10,000.
Findings from the Institute for Fiscal Studies that tax changes in April will pull around 750,000 people in the 40 percent tax bracket, whilst tax credit cuts will push the marginal rates of 175,000 working parents above 70 percent. This means that in theory the effective tax rates for middle to high earners could reach 83 percent.
A treasury spokesman said: “Tax credits will be targeted at those who need them most. At the same time, personal tax changes will remove nearly a million of the lowest earners out of tax altogether and around 23 million basic rate taxpayers will gain by £170 per annum.”
The IFS have stated that the overall effect of the austerity measures will cause an overall reduction in disposable income of around £200.