TODAYonline | World | UK Finance Minister cuts top income tax rate

LONDON - Britain's Finance Minister has cut the rate of tax the country's wealthiest citizens will pay but insisted the rich will pay more through a raft of measures to prevent tax avoidance and a punitive new charge on expensive property sales.

In his annual Budget statement yesterday, Mr George Osborne said he was cutting the top rate from 50 pence in the pound to 45 pence by April next year, arguing that the original higher rate did not yield as much as expected - partly because the rich were able to avoid tax.

Mr Osborne sought to deflect any criticism that any largesse was confined to the wealthy by announcing a big hike in the level that Britons start paying tax to ?9,205 (S$18,430). The cost of that measure will cost the Treasury around ?3.3 billion in 2013 to 2014.

"Together, the British people will share in the effort and share the rewards," Mr Osborne said at the conclusion of his hour-long statement. "This country borrowed its way into trouble, now we're going to earn our way out."

The 50 pence tax rate was introduced by the previous Labour government in response to the sharp deterioration in the country's public finances in the wake of a banking crisis that led to the country's deepest recession since World War II.

Mr Osborne insisted that the rich should pay a bigger proportion of their income than the poor and said he was offsetting the cut in the top rate by other taxes on wealth, including a new 7 per cent charge on the sale of houses valued over ?2 million.

Most of those are primarily located in London, which has been the favoured second home of choice for many of the world's super-rich. Mr Tony Ryland, a senior tax partner at London Chartered Accountants Blick Rothenberg, said the changes will have "a major effect on the London housing market, potentially driving away overseas buyers".

The leader of the Labour opposition, Mr Ed Miliband, pounced on Mr Osborne's decision to cut the top rate of tax, mocking him for his oft-repeated mantra that "we're all in this together" and that he had failed the fairness test.

"After today's Budget, millions will be paying more while millionaires pay less," Mr Miliband said.

Overall, the budget measures were broadly neutral - Mr Osborne has little room for manoeuvre, given the government's primary plan to dramatically reduce borrowing and the recent warnings from credit ratings agencies that the country risks losing its cherished triple A credit rating if the public finances don't improve as planned.

Mr Osborne has also been constrained by the muted recovery from recession. He said Britain's economy would likely to grow by 0.8 per cent this year, according to independent forecasts from the Office for Budget Responsibility, which is tasked by government to come up with economic projections.

That's slightly higher than the 0.7-per-cent increase it forecast as recently in November. AP

Source: http://www.todayonline.com/World/EDC120322-0000085/UK-Finance-Minister-cuts-top-income-tax-rate

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