BANKERS are set to try to delay the receipt of bonuses to take advantage of the abolition of the 50p top rate of tax.
City workers could increase by tens of thousands of pounds the net value of their awards for this year’s performance by deferring payment by a few months from the start of 2013 to April.
George Osborne’s decision to reduce the top rate of tax to 45p in last week’s Budget was cheered by Tory backbenchers but experts warned high-earners could shift payments into the new tax year, which begins on 6 April.
A square mile recruiter who works with a series of banks told City A.M.: “What may happen is rather than the first payment coming in February or March 2013 it may come in April.”
Others may choose to take the cash immediately, however, because they fear being made redundant.
The tax cut, for people earning over £150,000, was meant to be one of the highlights of the Budget, with Osborne describing the 50p rate as “the highest in the G20.... (and) widely acknowledged by business organisations and international observers as harming the British economy.”
It was overshadowed, however, by the furore over the “granny tax”, questions over the timing of the 45p tax rate and impact on revenues.
Danny Cox, head of advice at Hargreaves Lansdown, said: “A deferral provides high earners plenty of time to delay their bonuses (and) dividends to take advantage of lower tax rates. This will potentially reduce the amount of tax collected over the next 12 months.”
Chris Sanger, head of tax policy at Ernst & Young said the decision not to introduce it until April 2013 was “somewhat surprising, especially as he (Osborne) criticised his predecessor for forestalling”. Alistair Darling, then the chancellor, announced the 50p tax in the 2009 Budget and it was introduced as a “temporary” measure in 2010.
The Treasury did not return calls. RBS and Lloyds said a bonus deferral was not being considered.