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British top earners begin paying 50p in income tax for each pound over £ 150.000

The “tax man” is hungry

British top earners will pay 50p in income tax on each pound of their salary over £150,000 from Tuesday April 6, the start of the new financial year. Previously, the highest rate of income tax payable was 40p on every pound for earnings above £37,400.

The Government's new tax rate, which applies only to taxable incomes above the £150,000 threshold is aimed at boosting public finances. Meanwhile, people with an adjusted net income of £100,000 or more will see their tax-free income personal allowance reduced by £1 for every £2 above the limit.

Therefore those earning more than £112,950, will from now have to pay tax on the first £6,475.

When both measures are combined, it means an individual on a salary of £200,000 will now pay £77,520 in income tax - up from £69,930 in the past financial year - an additional payout of £145 per week.

Labour's income tax changes will be in place for at least the next month, but high earners are unlikely to face an immediate respite if the Conservative Party wins the General Election.

In a document on Labour policy, the Tories say: “Labour's dossier includes a £2.4 billion cost of abolishing the 50p tax rate, but we have been very clear that we have not pledged to reverse this measure.”

The UK Institute of Directors has warned the new rate will knock business confidence and foreign investment, while encouraging the wealthy to seek loopholes.

Commenting, Miles Templeman, director-general at the Institute of Directors, said: “The new 50p rate may be popular in some circles, but we believe it's likely to generate little or no revenue in the short term and over time lead to lower revenues overall.

”With public finances likely to remain poor for some years and the UK's tax competitiveness already in decline, this highly political measure cannot be justified.”

Business leaders had previously suggested Britain's high earners would head abroad to dodge the 50p tax rate, however there is little evidence this has happened.