Britain now, coming here soon

High earners hit as 50p tax rate goes ahead

People earning more than £150,000 a year will see a reduction in their take-home pay from today as the new 50p rate of income tax comes into force at the start of the financial year.
In addition to the new tax bracket, announced by Alistair Darling in the Budget last April, high earners will also be subject to a new 42.5 per cent tax on dividends while those people making more than £100,000 a year will have their personal allowance reduced.
The higher rate of income tax provoked an outcry among business groups after it was introduced to stem the burgeoning public deficit.
The Institute of Directors warned that the tax will simply drive top earners abroad, while the CBI decried it as "economic vandalism".
However, the mass relocation of the very rich to gentler tax regimes of Geneva and Zurich does not appear to have materialised.
Meanwhile, a rush of bonus payouts is expected by banks after the Chancellor's one-off 50 per cent tax on bankers' bonuses of more than £25,000 expired yesterday.
The levy, which was announced in the Pre-Budget Report last December, prompted suggestions from the finance industry that banks would simply delay paying out traditional Christmas bonuses until the spring.
However the tax on bonuses has raised £2 billion, almost four times the Treasury's initial predictions of £550 million.
Other changes coming into force today include a rise in child tax credits and an increase in the tax-free allowance that can be put into an ISA, with the annual ISA limit rising from £7,200 to £10,200, of which half can be saved in cash, from next month.
The stamp duty hoilday for homes worth less than £250,000, which was announced in the Budget and came into force two weeks ago, runs until March 25 2012, although only those who have never owned their own home are exempt.
Yet the changes announced in the Budget could be shelved if the Conservatives win power, including an increase on stamp duty from 4 per cent to 5 per cent for homes worth more than £1 million, due to take effect from April next year.
George Osborne, the Shadow Chancellor, has said that if the Conservatives win the election they will introduce an "emergency Budget" within 50 days of gaining power, which would overturn many of the Chancellor's policies.
David Cameron has committed to reversing Labour's plan to raise national insurance contributions by 1 per cent in 2011, although an incoming Tory Chancellor would need to find £10 billion to fill the gap.