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How does cutting the top rate of tax increase tax receipts?

Posted: 14th Mar 2016 by Robert Salenius Taxation

How do you increase tax receipts? By looking at only one tax year in isolation, that’s how.

Apparently, £8bn was raised by cutting the top rate of income tax from 50% to 45% by referring to increased tax receipts in 2013/14.

However, what would you do if in March 2012 you were told that the top rate was going down from April 2013?  Francesca Lagerberg said at the time, “those with the wherewithal to defer dividends and bonuses will do so until the tax rates fall”.

In addition, a forecast by HMRC stated £6.25bn of income would be shifted from 2012/13 to 2013/14. Do you think Mr Osborne is preparing us for another fall in the top rate of income tax from 45% to 40%?

We shall find out on Wednesday.