Steep rises in taxation for the better off, lower than expected unemployment and a gradually recovering economy are helping to boost income tax revenues.
Analysis of HM Revenue and Customs data shows the Government is likely to receive about £10bn extra in income tax during this financial year than was previously thought.
From a low of £151bn last year, revenues may reach about £173bn this year. Almost all of the extra money will come from taxpayers in the higher rate bands – 40 per cent and the new 50 per cent rate on incomes over £150,000.
The one-off tax on banker's bonuses has already raised an additional £1.5bn over and above what the bankers would normally have paid, three times the Chancellor's initial estimate.
Higher wage settlements, after a period of widespread freezes in the private sector, should also boost the tax take.
Incomes Data Services (IDS) says the proportion of pay freezes has continued to fall, to reach 25 per cent of settlements in April, down from 31 per cent at the end of March. The typical pay settlement level has risen slightly to 1.9 per cent, up from 1.8 per cent in February. Pay in manufacturing in particular is recovering, with pay rises of up to 2 per cent now.
However, IDS reports that the incidence of pay freezes in the public sector is rising: 115,000 consultants, general practitioners and dentists had their pay frozen for 12 months from 1 April this year. All of the three main political parties have promised strict pay limits for public-sector workers.
Apart from the new 50p rate and bankers' bonus levy, the Government has moved to restrict tax relief on pension contributions for those on more than £130,000 a year, has further tightened up on tax loopholes, and is charging some residents £30,000 for non-domicile status. Increases in national insurance will also raise revenues.Reuse content