Fears that London faces an exodus of bankers increased yesterday as it emerged that many will have to pay more income tax from next month than in any of the capital's rival financial centres around the world.
The new 50 per cent rate of tax for income over £150,000 comes into force on 6 April, and the hike will see the City become the most expensive of eight financial centres for high earners, according to Financial News. This has increased concerns that London's status as one of the world's pre-eminent financial markets could suffer.
British bankers earning £1m in basic pay and bonus currently pay £403,689 in employee tax and social security. That figure is at least £60,000 lower than if they were based in Geneva, Paris or Frankfurt, and only those based in Hong Kong or Dubai pay less. From April, London will demand the heftiest tax bill for that bracket, as it rises to £491,279.
KPMG, the accountancy group that compiled the data, found that London would be most expensive domicile for bankers on a combined pay and bonus of £500,000, but that it was more competitive than Frankfurt and Paris for those earning £250,000 a year.
Ian Hopkinson, head of people services tax at KPMG, said: "This is very stark, the facts speak for themselves. If you earn above £250,000, London goes from being very competitive to completely uncompetitive."
The results come after Chancellor Alistair Darling introduced a bonus "supertax" of 50 per cent on those awards above £25,000, which expires on 6 April, and could reap the Treasury £2.5bn.
Mr Hopkinson said: "Tax as an issue is now front and centre for financial services firms." Many fear that the increase in taxes will drive talented financial services professionals abroad. Boris Johnson, the Mayor of London, said up to 9,000 bankers could quit the capital in protest at the bonus tax.Reuse content