Forget 50p — scrap the 60p tax rate

Imagine if a Chancellor stood up and announced that those earning up to £100,000 would pay a 40p tax rate, those earning £100,000 to £112,950 will pay a 60p rate, and those earning above £112,950 will pay the 40p rate, and then the top earners will pay a 50p rate. That’d be crazy, right?

But that’s exactly what Alistair Darling announced in his 2009 Budget. So how did he get away with it? By delivering his announcement in code. Instead of talking about marginal tax rates, he described the move as withdrawing the personal allowance for those with incomes over £100,000. The language may be different — and may sound much more reasonable — but the effect is exactly the same. And because of the Liberal Democrats’ policy of raising the personal allowance, the range of incomes facing that 60p rate has grown. The result is an income tax schedule that will look like this from 6 April:

The Mirrlees