The threshold at which the tax rate jumps from 20 per cent to 40 per cent will drop by £1,400 on 6 April, catching an extra 750,000 people in the higher-rate tax net, according to the Institute for Fiscal Studies (IFS).
From April, workers will start paying the higher rate 40 per cent tax on income of more than about £42,475, down from the present threshold of £43,875.
As well as overhauling tax credits, the Government is increasing the main rate of national insurance from 11 per cent to 12 per cent, while the extra NI charge on earnings above £42,484 will double to 2 per cent.
The reduction in the higher-rate tax threshold is expected to help to offset the £3.4 billion cost of extending the tax-free allowance by £1,000 to £7,475, which will mean an extra 500,000 people pay no tax at all, the IFS said.
Source – The Times
