Throughout my tax career, it has often been said that there is an ‘optimum’ rate of income tax. Any rate over that optimum rate and the Treasury loses out because taxpayers seek out more ways to mitigate that higher rate of tax as much as possible.

I have always been mildly sceptical as to whether this is true or not, but I guess the figures speak for themselves.

It has recently been suggested that the 50p top rate of tax actually cost the Treasury money rather than bring in additional revenue. Let me demonstrate this with some fact and figures……

In 2008-09 the Treasury raised £22.5bn in self assessment income tax from the then 40p top rate.

However, in 2012-13 (50p rate)  just £20.6bn was collected and in 2013-14 (45p rate) £20.9bn, which demonstrated that between 4-5 % less was collected in those 2 years.

Now, of course it could be argued that there are other factors to consider but there certainly does appear to be some evidence to show that lower rates equates to more being collected.

We wait with anticipation for lower tax rates!