The 50p tax row: What you need to know

 

Labour's pledge to restore the top tax rate for high earners to 50p has sparked criticism from business leaders and the Conservative party.

This is what you need to know:

What is the 50p tax rate?

Introduced in April 2010, it marked the first increase in the top tax rate for high earners in the UK for over 30 years. At the time, it was expected to yield around £2.5 billion.

...So?

At present income of up to £32,010 is taxed at the basic rate of 20 per cent.

A higher rate 40 per cent applies to income from £32,011 to £150,000.

If Labour succeeds in bringing the 50p tax rate back, high earners will have to pay a 50 per cent "additional rate" if they make more than £150,000 a year. At the moment they pay 45 per cent on income above that level.

Why now?

The shadow chancellor argues that this is not the right time to give the richest people in the country a tax cut because the "deficit is still high" and "real income is falling" for middle-class families. Labour tried to block the abolition of the 50p rate in 2012 but were defeated in the Commons.

How much would it raise?

That depends.

Ed Balls claims that restoring the 50p tax rate could raise £10 billion over three years. But the party has not put an official estimate on it.

George Osborne, who cut the 50p tax rate to 45p in his 2012 budget, thinks differently. The Chancellor argued that the 50p rate isn't justifiable because it "damages the economy and raises next to nothing".

A HM Revenue & Customs assessment published in March 2012, estimated that cutting the top rate to 45p would cost the economy £100m a year.

What do critics say?

A group of business leaders have been quick to criticise the proposal, claiming that it would hamper investment at a time when the UK needs it.

The heads of 24 companies, including Ocado chairman Sir Stuart Rose, West Ham United vice chairman Karren Brady and billionaire businessman Richard Caring, recently penned an open letter dismissing the restoration of the 50p tax rate as a  "backwards step" that will cost jobs and halt the recovery.

Mayor of London Boris Johnson urged the Chancellor to "open up some more blue water" between the Tories and Labour by cutting the top rate of tax to 40p from the current 45p.

And even Lord Myners, a former Labour City minister under Gordon Brown, questioned the move, arguing it is unclear how "predatory" taxation would help the economy.

Graphics: Jill Ornitz

 

Start your day with The Independent, sign up for daily news emails
Sport
England's women celebrate after their 3rd place play-off win against Germany
Women's World CupFara Williams converts penalty to secure victory and bronze medals
Arts and Entertainment
Ricardo by Edward Sutcliffe, 2014
artPortraits of LA cricketers from notorious suburb go on display
News
newsHillary Clinton comments on viral Humans of New York photo of gay teenager
Arts and Entertainment
The gang rape scene in the Royal Opera’s production of Gioachino Rossini’s Guillaume Tell has caused huge controversy
music
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'
Compton Cricket Club

Compton Cricket Club

Portraits of LA cricketers from notorious suburb to be displayed in London
London now the global money-laundering centre for the drug trade, says crime expert

Wlecome to London, drug money-laundering centre for the world

'Mexico is its heart and London is its head'
The Buddhist temple minutes from Centre Court that helps a winner keep on winning

The Buddhist temple minutes from Centre Court

It helps a winner keep on winning
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'