50P Tax Rate to go in 2013

This is a slightly shortened article from the Financial Times, 24th March. The emphases, are mine.

Osborne looks at scrapping 50p rate in 2013

George Osborne is looking at scrapping the 50p top rate of tax in his 2013 Budget, as evidence mounted on Thursday that individuals are going to great lengths to avoid the levy, undermining revenues for the exchequer.

The Office for Budget Responsibility said it had assumed £2bn of tax revenues for the 2009-10 tax year would not be collected in 2010-11 because of evidence that companies had paid bonuses just before the 50p rate was introduced and business owners paid themselves large dividends to avoid the tax.

Mr Osborne’s team insist there is no timetable for scrapping the 50p rate but all the political signals from the Treasury and senior coalition figures suggest that top earners have just two more years to endure the “temporary” levy.

The chancellor said in his Budget that it would be wrong to cut taxes on people earning more than £150,000 while others on much lower incomes were making “sacrifices” but gave a strong signal that reform was on the way.

“I am clear that the 50 pence tax rate would do lasting damage to our economy if it were to become permanent,” he said. “That is why I regard it as a temporary measure.”

The Liberal Democrats have signalled that they have no ideological objections to the move.

Stephen Herring, a tax partner at BDO, an accountancy firm, said numerous owner-managed companies decided to accelerate up to five years’ worth of dividends, before the rise in the dividend tax rate from 25 per cent to 36.11 per cent last April. “It happened on a very substantial scale.”