The 50% tax rate for top earners that came into force this month will damage foreign investment and entrepreneurial aspiration, argues the Institute of Directors (IoD).
The new rate will be levied on taxable incomes in excess of £150,000 a year, affecting the 300,000 highest earners in the UK.
The 600,000 people who earn more than £100,000 a year will have their personal tax allowance reduced, which will generate £1.5bn for the government.
The IoD also believes that some high earners will move abroad where tax rates are lower.
The IoD also believes that some high earners will move abroad where tax rates are lower
“We believe the 50% rate is likely to raise little or no tax overall in the short-term and lead to lower overall tax revenues in the medium to long-term,” says an IoD spokesman.
The directors’ organisation also suggested that directors of multinational companies might also decide to relocate their headquarters overseas to reduce their corporation tax liability in the UK.
While high earners will pay more tax, there will be fewer of them in the country, according to a leading tax expert “They will leave the UK or not come to the UK,” says Patrick Stevens of Ernst & Young.
“Undoubtedly fewer people are coming to the UK, to make up for the normal leavers, so the population of those high earners is going down.”
