Exclusive: Treasury tax raid to drag 200,000 Londoners into higher rate
NEW analysis suggests that almost a quarter of a million Londoners will be dragged into the higher rate tax band as a result of Jeremy Hunt’s decision to freeze income tax thresholds in the Autumn Statement.
Some 213,165 workers in London, and 122,543 more across the wider south-east, will paying the 40 per cent rate as soon as this April as a result of the level at which it kicks in not being uprated with inflation or average pay, per analysis by Investec Wealth and Investment.
Wonks warned the Treasury was at risk of “killing the goose that lays the golden egg” if the capital was squeezed too tightly.
It means that more than a third of Londoners, 36.1 per cent, will be paying the higher rate.
Investec Wealth and Investment’s Faye Church said “workers in London… are taking the biggest hit” from the Treasury’s push to refill the country’s post-pandemic coffers.
Hunt also reduced the top rate of tax threshold from £150,000 to £125,140. Church said “given the number of high earners working in the City, it stands to reason that they will be amongst the hardest hit” by the threshold cut.
Hunt’s move to cut the threshold came just weeks after former Chancellor Kwasi Kwarteng announced plans to scrap the top rate of tax altogether, only to u-turn after political pressure and a market reaction to his wider ‘growth plan’ package.
Last night think-tank leaders in the capital said the Treasury’s reliance on London and the south east could be counter-productive.
“The country’s stark over-reliance on London’s success to balance the books is plain for everyone to see,” said Nick Bowes, chief executive of the Centre for London, told City PM last night, arguing that plans to ‘level up’ the country could potentially relieve some of the pressure on the capital.
Bowes said the tax changes meant “the country’s economic health is dangerously reliant on the capital firing on all cylinders, but it would be foolish to take for granted that London’s success will just continue into the future regardless.
“If the city sees reduced investment in the infrastructure and public services London needs to thrive, this could kill the goose that lays the golden egg, leaving the whole nation poorer,”
he continued.
The average Londoner already pays double the national average in income tax, according to the most recent official figures.
The Treasury has previously said that “we have been honest about the difficult decisions we face and are asking those with more to contribute more.”