The new 50% 'Super Tax'

This was the headline grabbing change in the Budget Report. The Chancellor proposes to introduce a new 50% income tax rate on anyone earning over £150,000. It was originally announced as a 45% tax rate in the 2008 Pre Budget Report, but the Chancellor increased it to 50% in the 2009 Budget. He has also brought it forward as the 45% tax rate was not due to be implemented until 6 April 2011, whereas the new 50% tax rate will apply as from 6 April 2010. Whilst it's still some way below the 83% income tax rate of the 1970s, the UK has had a 40% higher rate of income tax since 1988/89, so this would be the first change to the top tax rate for over 20 years. Therefore after 6 April 2010 however, we will end up with:

20% tax for income within the basic rate band (in 2010 that could be income between, say, £7,000 and £40,000).

40% tax for income in the higher rate band but below the new super tax band (for example, £40,001 - £150,000).

50% tax for income above £150,000. For high-income earners this would be coupled with the loss of personal allowances. If you're looking at options to avoid the 50% 'Super Tax' then see these articles: Using a company to avoid the 50% super tax How the changes in the tax rates will affect you in the next 2 years