Michael Burton 20 March 2014

More public sector staff pulled into 40% tax bracket

More and more public sector workers are being dragged into the 40% tax bracket which was originally targeted at the very rich, former Chancellor Lord Lamont told a post-Budget briefing today.

Asked what he would have introduced were it his Budget the peer replied: 'I would have raised the 40% tax threshold which was only meant to be the top rate when it was introduced in 1988. At that time one in 20 people paid it but now the figure is one in six and 6m people are paying 40%.

'Earning £40,000 at age 45 isn't exceptional. This now includes nurses, teachers, police, army officers, even tube drivers. I don't think they should be paying almost half their income in tax.'

Lord Lamont told the JLA briefing that with the tax allowance set to rise to £10,500 by next year the tax base was 'too narrow' and relying on fewer taxpayers. He added: 'We could end up with making 40% tax the basic rate which would be rdiculous.'

From this April anyone earning over £41,865 will lose 40% of their income above this threshold. The tax-free allowance rises to £10,000 and above this figure the tax rate is 20%.

In yesterday's budget, George Osborne announced the tax-free allowance would rise to £10,500 from 2015 meaning some 288,000 people now pay no income tax at all. The threshold when 40% kicks in will rise by 1% to £42,285 in April 2015.

Although the 40% threshold this year and next rises by 1% it still means employees near that threshold who receive more than a 1% pay rise or receive promotion will find themslves dragged into the 40% tax bracket.

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