Record numbers pay top-rate tax

THE number of people paying the top rate of income tax is heading for its largest increase in four years - putting a record number of workers in the highest tax bracket.

Up to 2.8m wage earners will find themselves paying tax at 40% during 2002-2003, according to official estimates. That would be an increase of 150,000 over the last financial year and more than a third more than when Labour took office in 1997.

The number of taxpayers on basic and starting rates is also predicted to rise dramatically. A total of 28.3m are expected to pay some form of income tax - an increase of half a million since 2001-2002.

The estimates, posted on the Inland Revenue's website, show that Gordon Brown's Treasury is due to receive a record £108.9bn in income tax in the current financial year. A central plank of Labour's return to power was a pledge not to raise income tax, but this is effectively a backdoor increase.

Experts said the rise was prompted by a combination of economic growth - which can push up earnings - and the failure of tax bands to adjust for an increase in wages.

John Whiting, senior tax partner at PricewaterhouseCoopers, said: 'The number paying higher rate tax has gone up by around 50% over the last ten years. This is partly a tribute to how well the economy has done, but it also reflects the fact that the Chancellor is quietly taking more and more at 40%.'

The Revenue estimates also show the booming housing market is expected to push up stamp duty receipts to £8.2bn over the next 12 months. Stamp duty revenues, including tax from share dealing and property, are likely to be more than £ 1bn higher than in 2001-2002.

Overall, the Inland Revenue is predicted to receive a record £155.7bn from British taxpayers over the next 12 months, with receipts from inheritance tax also rising. Corporation tax revenues are also set to increase by more than £500m.

In 2002-2003 all taxable income in excess of £29,900 will fall into the 40% tax band, an increase of £500 from 2001-2002.

The Tories say many ordinary workers such as policemen and teachers are now paying 40% tax on some of their earnings. Shadow Chancellor Michael Howard, said: 'It is clear that under Labour more and more people are falling into the top tax bracket. By no stretch of the imagination can many hardworking people and families who fall into that top tier be described as rich.'