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Labour government would reintroduce 50p tax rate

28 - 01 - 2014

Labour has pledged to reintroduce the 50% tax band, which was cut to 45% by the coalition government in April 2013.



The previous Labour government originally created the top tax band in 2010, increasing the highest tax rate from 40p to 50p.

 

Labour unsuccessfully tried to block the abolition of the 50p rate in 2012.

 

Shadow chancellor Ed Balls has promised to reintroduce the 50p rate on earnings above £150,000 if Labour wins the next election in 2015.

  

 

A ‘fairer share of the burden’ or ‘anti-business’?

 

The 50p tax rate was originally introduced by Labour to help rescue the UK’s finances after the financial crisis.

 

Chancellor George Osborne reduced the top rate to 45p in 2012 saying that it “damages our economy”.

 

Promising to reintroduce the 50p rate, shadow chancellor, Ed Balls has said "those with the broadest shoulders" should bear a "fairer share of the burden".

 

Mr Balls said that it was a "fair" measure to be used while Labour reduced the "huge" deficit it would inherit if it won the 2015 election.

 

It is suggested that the 50p rate would remain in place until the budget deficit had been cleared, which Labour would aim to do by 2020.

 

Labour has not put a figure on how much the increased rate of tax would raise but believes that the impact would be greater than an original assessment suggested based on the number of people earning salaries at the top level.

 

An HMRC assessment in 2012 had suggested that the 2013 cut from 50% to 45% would cost £100m a year.

 

However, the assessment also said the high tax rate made the UK a "less attractive place to start, finance and grow a business".

 

Prime minister, David Cameron, has said that plans to reinstate the 50p rate are “anti-business, anti-investment and anti-growth” and David Gauke, Conservative Treasury minister, has said the 50p rate would "raise little, if anything”.

 

According to the BBC, more than 20 company bosses have written to the Daily Telegraph to condemn the plans.

 

Ed Balls has rejected claims that Labour's pledge to bring back the 50p top rate of income tax is part of an "anti-business agenda" in the party.

 
 

 How is income tax worked out?

 

Your ‘taxable’ income includes earnings from employment, most pensions and savings interest, dividends, rental income and any income paid to you from a trust.

 

No tax is due on a personal allowance, which is £9,440 for 2013-14. The personal allowance is due to rise to £10,000 from April 2014.

 

Income of up to £32,010 is taxed at the ‘basic rate’ which is 20%.  A ‘higher rate’ of 40% applies to income from £32,011 to £150,000.

 

Income over £150,000 is currently taxed at 45%.

 

Make the most of your income

 

Got questions or worried you’re paying too much tax? Make the most of what you earn by paying the correct amount of tax for your circumstances.

 

Foremans can help! Whether you’re an existing client or just looking for some initial information, you can call our friendly team on 01244 625 500 for free initial advice




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Instant Information

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WEEKLY INCOME INFORMATION

Number Of Weeks
Tax Code
Primary Hours
Primary Rate In £
Secondary Hours
Secondary Rate In £
Other Hours
Other Rate In £
Weekly Bonus In £
Total Anticipated
Income For A Week
-
Anticipated Annual
Pre Tax Income
-
NORMAL WEEKLY EXPENSES
Miles Per Week
Other Expenses Per Week
Annual Mileage
-
Mileage Expenses
-
Total Annual Expenses
-
FLAT RATE VAT

Choose the Industry Sector that you work in. Use the drop down menu in the usual way.

The VAT Flat Rate Applied -

WARNINGS

-

 

Get Alerts. The law changes!

RESULTS TABLES

COMPARISON TABLE FOR NET INCOME

BUSINESS STRUCTURE
CORPORATE
SOLE TRADERS
UMBRELLA
AGENCY
Post Tax Weekly Pay
-
-
-
-
Avarage Hourly Take Home Pay
-
-
-
-
Annual Take Home Pay
-
-
-
-
Plus Taxed Holiday Pay Fund Less Higher Rate Dividend Tax
-
-
-
-
Annual Take Home Pay
-
-
-
-

RELATIVE INCOME BY STRUCTURE

BUSINESS STRUCTURE
CORPORATE
SOLE TRADERS
UMBRELLA
AGENCY
Measured against PSC
Measured against PSC
Measured against PSC
Worse off
Weekly by :-
-
-
-
-
Worse Off
Annually by :-
-
-
-
-
Measured against AGENCY
Measured against AGENCY
Measured against AGENCY
Worse off
Weekly by :-
-
-
-
-
Worse Off
Annually by :-
-
-
-
-

Fixed Data

PAYE

Tax Code L between 0 and 999.
0
Tax Rate
Personal Allowance
£11500.00
0.00%
Lower
£0.00
0.00%
Basic up to
£33500.00
20.00%
Higher above
£33501.00
40.00%

Statutory rates

National Minimum Wage
£7.50
Holiday Pay
10.77%
Mileage Rates
Per Mile
Up to 10,000 miles
£0.45
10,000 miles
£0.25

CIS

Rate
Percentage
Gross
0.00%
Standard
20.00%
Higher
30.00%

Corporation tax

Small Company Tax Rate
19.00%

National insurance

Primary Threshold
£8164.00
Secondary Threshold
£8164.00
Employers NI between PT and UEL
13.80%
Employees NI above UEL
12.00%
Employees NI
2.00%
Class 4 NI between LPL and UPL
9.00%
Class 4 NI above UPL
2.00%
Class 2 NI
£2.85
Annual LEL
£5880.00
Annual UEL / class 4 upper profits
£45000.00
Class 4 Annual lower profits limit
£8164.00
Weekly PT
£157.00
Weekly LEL
£113.00
Weekly UEL
£866.00

UMBRELLA COMPANY

Holiday pay accrual
 
Is Holiday Pay being accrued?
Yes

AGENCY INFORMATION

Agency Uplift Applied
10.00%

Assumptions



General                                                                                                                              

  • The user is over 21 and subject to tax in the UK
  • The user wishes to minimise their tax liability
  • The user is subject to national insurance i.e.he/she is not over retirement age
  • Only current tax rates and limits are applied
  • No tax mitigation payments are made e.g. pension contributions
  • Only 3 digit letter 'L' tax codes shown in the drop down list can be entered 
  • The user does not have a turnover greater than £100,000 where fewer reliefs and or higher taxes may apply

Expenses

  • All miles claimed as expenses are for business use using a personally owned car or van
  • All other expenses claimed are wholly, necessarily and where appropriate exclusively for the benefit of the business

Foremans LLP Charges

  • Foremans fees associated with Limited Company, Sole Trader or Umbrella are as per published rates
  • Foremans current Service Costs are allowed for in all calculations.

Holiday Pay

  • Holiday pay is accumulated week by week by Umbrella or Agency employer but paid out during the year

VAT

  • Limited Company or Sole Trader will be VAT registered
  • Limited Company or Sole Trader will take advantage of Flat rate VAT
  • Flat rate applied includes the benefit of the additional 1% applicable to the first year of VAT registration

Limited Company Conditions

  • One director / one shareholder in a Personal Service Company
  • Director of Personal Service Company elects to vote for 100% dividend after salary, costs and expenses
  • Director's salary is maximum salary to the primary threshold for NI
  • The Limited Company is trading normally i.e it is not subject to IR35 and is not a Managed Service Company

NOTES

  • The Current tax rates are taken from the Fixed Data Table
  • The current Value Added Tax Rate is 20% and is applied to all invoices and expenses as appropriate
  • The Director's Salary is fixed in relation to National Insurance thresholds. Higher Rate Taxpayers should consider the advantages and disadvantages of a larger annual salary or bonus
  • Higher Rate Taxpayers may wish to consider the advantages and disadvantages of shared ownership of their business
  • Users with a tax code other than three digits and letter "L" may telephone or email our Development Department to request a detailed calculation
  • Generally the use of an Umbrella rather than an Agency payroll is only efficient if sufficient weekly expenses are allowable and claimed
  • The expenses claimed under an Umbrella should not prevent the proper operation of National Minimum Wage
“Outstanding and clever tax calculator. I cannot believe this is actually free. We are an umbrella company and we use this calculator all the time”
Dave Wilde, Foremans (UK) Limited
Foremans LLP
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