Vir Cantium

I'm right, you know …

Rush Job? Darling Gets His Sums Wrong

Is there a possibility that Alistair Darling may have got his sums wrong?

Bear with me on this.

Increasing the personal allowance by £600 is worth £240 to higher rate taxpayers (marginal rate 40% x £600 = £240). Reducing the higher rate threshold just means that £600 of income is then taxed at an extra 20% (40% – 20%) = £120. Higher rate taxpayers are therefore £120 better off.

The point is that increasing the personal allowance reduces the total of taxable income – which for a higher rate taxpayer is £600 at 40%, not just 20%. Cheers, Alistair!

He should have reduced the 40% threshold by £1,200, not £600.

But hey, I’m just an accountant. Clearly the Chancellor knows better. I mean, he’s in charge of the national treasury.

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One response to “Rush Job? Darling Gets His Sums Wrong

  1. Magnus10000 May 14, 2008 at 12:00 am

    You are of course right here – and HMRC has hastily made this clear: http://www.hmrc.gov.uk/news/may13.htm

    Proof positive that the Chancellor has a firm grip on tax policy?

    M

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