HUNDREDS of thousands more workers will be dragged into the higher rate tax bracket under new proposals announced yesterday, which will see the threshold rise at both below the rate of inflation and wage increases.
The higher rate threshold will go up by one per cent in 2014-15 and 2015-16, bringing an additional 400,000 people into the 40 per cent band. That will take the number in the higher band up from 3m to 3.4m, or from just below 14 per cent to just above 15 per cent.
The change is set to raise £295m in 2014-15, rising to £1.1bn per year from 2016-17 onwards.
“The proportion of tax generated by income tax projected to rise by two per cent over the next five years, from about 27.6 per cent in 2012/13 to 29.6 per cent in 2017/18,” commented Patrick Stevens, a tax partner at Ernst & Young.
The chancellor also announced measures yesterday to increase the capital gains tax annual exemption by one per cent in 2015-16 up to £11,100.
The inheritance tax nil-band threshold, which has been frozen since 2009, is also due to rise from £325,000 at the moment to £329,000 at the end of this Parliament.