A £50,000 Higher Rate Tax Threshold

Mr Cameron’s promise of a £50,000 starting point for higher rate tax is not all that it seems.

The Prime Minister ended the Conservative Party Conference with a pledge to increase the higher rate tax threshold – the starting level of income at which 40% tax is payable – to £50,000 “in the next Parliament”.  At present, the threshold is £41,865 (made up of a £10,000 personal allowance plus a £31,865 basic rate band). Although it sounded generous, the reality was rather different:

Chart showing the change in the higher rate tax threshold (Actual and CPI-Linked)

As ever, waiting for politicians to reduce your tax bill will probably prove less reliable than making sure your own personal tax planning is up to scratch.

Tax Laws can change. The Financial Conduct Authority does not regulate tax advice.