Andy Burnham has been warned against implementing a 50% income tax rate for high earners if he becomes Prime Minister. The caution comes as tax experts cite historical precedent showing the last 50% rate generated surprisingly little Treasury revenue, according to The Times. Burnham told The Telegraph last year there was 'definitely a case' for raising the top income tax rate from its current 45%. The 45% additional rate currently applies to taxable income over £125,140 in England, Wales, and Northern Ireland. The policy debate centers on whether higher rates would generate meaningful revenue or simply trigger behavioral changes among wealthy taxpayers to avoid increased taxation.
Tax Experts Project Limited Revenue from Rate Increase
Robert Salter, a director at accountancy firm Blick Rothenberg, stated the additional rate generates minimal Treasury income. "Adding 1p would raise about £230million. By comparison, raising the basic rate by the same amount raises about £7billion," Salter said. He concluded it is "probably not worth it for Andy Burnham because it is so limited in what it can generate."
Stephen Kenny, a tax partner at PKF Littlejohn, described current sentiment among high earners: "The feeling at the minute is that it's all a bit of a joke. Top earners are sick of all the rumours and conversations about wealth taxes, exit taxes and income tax rises."
Nimesh Shah from Blick Rothenberg warned that wealthy individuals could alter their behavior to avoid a 50% rate if announced to take effect at the start of the following tax year. Shah noted that "a mid-year rate increase should not be ruled out," but added "it is practically very difficult to implement and creates huge complexity."
UK Applied 50% Rate from April 2010 to 2013
Mike Hodges from accountancy firm Saffery referenced the previous 50% top rate experiment. "The most recent experiment with a 50 per cent top rate of income tax which lasted for three tax years from April 2010 wasn't a conspicuous success and should probably serve as a warning for any future chancellor," Hodges said.
The Times reported that during this period, the wealthiest altered their behavior to sidestep paying more, resulting in surprisingly little revenue for the Treasury. Chancellor-in-waiting Ed Miliband expressed his desire to raise the rate to 50% during his 2015 election campaign.
Accountants Warn of Implementation Complexity
Kenny stated that Burnham "needs to show he is going to lead a stable Government that won't keep changing its mind." Salter suggested positioning any rate increase as "a necessary measure in exceptional circumstances" to gain public support.
The practical challenges of implementing a mid-year rate change remain significant according to multiple tax professionals, who cite administrative complexity and the risk of triggering avoidance behaviors among high-income taxpayers.
FAQ
What income tax rate did Andy Burnham propose for high earners?
Andy Burnham indicated to The Telegraph last year there was "definitely a case" for increasing the top rate of income tax from 45% to 50% for high earners. The current 45% additional rate applies to taxable income over £125,140 in England, Wales, and Northern Ireland.
Why are tax experts warning against a 50% income tax rate?
Tax experts cite the historical precedent from April 2010 to 2013 when the UK last implemented a 50% top rate. According to The Times and multiple accountancy firms, the rate generated surprisingly little Treasury revenue as wealthy individuals changed their behavior to avoid paying more. Robert Salter from Blick Rothenberg stated that adding 1p to the additional rate would raise only about £230 million compared to £7 billion from raising the basic rate by the same amount.
