The 50p tax in action

Today, we have seen the 50p tax in action: reflected in January’s bumper tax receipts. A jubilant John Rentoul has just tweeted: “Where is Fraser Nelson when you need him? The 50p income tax rate has brought in a ton of money. He said it would probably reduce revenue.” He is absolutely right – but not for the reasons he thinks. Were John self-employed, he’d know that the tax paid last month was in respect of the 2009-10 tax year – when the top rate of tax was 40p. Of course, many of the super-rich are on PAYE – but that has happened since last April. It doesn’t explain a January uplift. Today’s surprise tax haul can be partly explained by the fact that folk sucked forward their income, to avoid the 50p rate. That’s what high-paid people do. They shift money, suck forward earnings, move cash abroad, work less, incorporate, take payment in other means, do anything they can to minimise their tax exposure.