“Budget 2012: new tycoon tax in victory for Nick Clegg” – so reports the Daily Telegraph:
In a significant victory for the Liberal Democrats, the Chancellor effectively introduced a 25 per cent minimum rate of tax in the Budget.
Under the changes, he will limit how much people offset their tax bills by investing in businesses or donating to charity.
Anyone seeking to claim more than £50,000 of tax relief in any one year will have a cap set at 25 per cent of their income from 2013.
Accountants said this means the wealthiest will have to pay at least 25 per cent of their income in tax. Although the highest rate of income tax is 50 per cent, reducing to 45 per cent next year, some wealthy people reduce their bills to almost nothing using different reliefs available from HM Revenue and Customs.
The introduction of this major change to the tax system is one of the main reasons why, as I wrote yesterday, if you are on more than £150,000, you will pay an extra £1,300 a year in tax on average as a result of this Budget.
As for what Labour would do on the 50p rate they seem to be flip and flopping with each new interview – sometimes saying they would reintroduce it if they had the chance tomorrow/next week, and sometimes not.
For more on the Budget see a couple of the media interviews I did yesterday – first on the News Channel and then on Radio 4:
* Mark Pack is Party President and Co-leader of the party. He is editor of Liberal Democrat Newswire.
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10 Comments
This is a victory, but the policy could have been better designed:
1) If you earn £4m, you can still take £1m tax free via forestry etc. That is a big loophole.
2) The 25% includes charitable giving. Is that really the intention?
3) Those earning over £150k only pay £1,300 more as a result of the budget – so this tycoon tax must be raising very little on its own.
4) Nick’s idea of a minimum average tax was much better
The rich have always been adroit at avoiding their taxes. Paint it any way you like but those who have gained the most from this budget are millionaires and wealthy bankers who will gain tens of thousands and,in some cases, hundreds of thousands of pounds. Osborne and the Liberal Democrats have handed the bankers a massive tax rebate funded by millions of pensioners.
I’d second Tim’s question about charitable giving. This could have quite a big impact on how many large gifts are given the charity, and it sits very oddly with the Government’s approach of encouraging the third sector!
@ MacK- you are teaching your granny to suck eggs!
Creative accounting will ensure that the rich and super rich do not pay their fair share just as it ensured that they did not pay the 50p tax.
“Victory for Nick Clegg”, eh! I note that in your euphoria over Osborne’s budget you, conveniently, skate- by his ‘throwaway’ line on “Extra £10B cuts in welfare”…On his interview ,( BBC4 Today) this morning, we were given an insight into his thinking on meeting ‘Child Poverty targets’. To anyone with a shred of compassion it made chilling listening..
Still let’s not allow such things to rain on the LibDem parade!
For once, I almost agree with Tim, though it’s not clear for whom this is a victory as the ‘tycoon tax’ is not Lib Dem policy (and rightly so, because as he says there are issues). I’d go further and say it’s a rubbish idea.
What is the tax take of this? (A small portion of £500m, it seems: way less than a mansion tax).
Why are charities being singled out?
The welfare point is not what Osborne makes it out to be, though there needs to be a robust Liberal Democrat response.
Noticed any rich people popping up on TV or in the papers to complain about paying more tax? No? Odd that isn’t it as they moaned long and loud about the 50p rate. As I’ve said before we don’t know how much revenue the 50p rate
would bring in if it had been left long enough to be effective. The target was 3 billion. The tax changes announced will raise just a few hundred million. So the only thing we really know for certain is that the target to be raised by extra taxes
on the rich has fallen from 3 billion to somewhere between 300-500 million. If that is victory what does defeat look like?
I’m afraid this is just another example of this woeful strategy to “own the whole govt programme” which reduces Lib Dem ministers to Tory spin doctors. Far better just to lay claim to these new measures and let the Tories defend the cut in the top rate of tax.
Silly electorate. Should have voted for Labour.
I am really concerned that capping tax relief on charitable donations will make it hard to channel tax free money into “charities” like Atlantic Bridge…. How will future Adam Werrittys be funded. This is a disaster.
I tend to agree with many of the comments, it would seem that the priority with the (incorrectly named) ‘tycoon tax’ is to increase tax take at the expense of everything else.
To me surely the true priority of a tycoon tax is to encourage tycoon’s/business magnates to invest significant amounts into UK businesses and/or the third sector directly. Whilst this doesn’t directly help the Treasury, it will probably help to reduce the amount of state aid the Treasury would have to give out. Yes this does require HMRC to come up with and enforce a set of rules that ensure such amounts truly go to business/charities and not to a tax avoidance wheeze. ..