Chancellor to axe 50p band by next year

CHANCELLOR George Osborne pledged to cut the 50p top rate of income tax yesterday, claiming it had raised only £100m a year and was damaging Britain’s image as a global centre for wealth creation.

Osborne cut the rate to 45 per cent, which aides hinted would now be the permanent top rate of tax. The 50p rate, which was introduced by Labour in 2010, was always described as “temporary”.

The 5p cut in the top rate will not come in until next year, allowing Osborne to keep his pledge to retain the rate while there is a pay freeze in the public sector.

The chancellor faced a barrage of criticism from right and left, with business leaders saying he has not gone far enough and Labour saying the £100m revenue analysis had been “politicised”.

Aides to the chancellor pointed out that a new rate of stamp duty and anti avoidance measures targeted at the rich would raise five times the amount the exchequer was losing by scrapping the 50p rate.

Osborne said: “No chancellor can justify a tax rate that damages our economy and raises next to nothing.”

But the Institute of Directors said: “The chancellor has not gone far enough or fast enough on income tax. 50p was hugely damaging, but at 45p we are still uncompetitive... This fudge will do little to combat the impression that Britain is a high-tax country.”

Accountants said the Treasury would miss out on revenue this year as high earners push income into 2013 to take advantage of the lower rate.