Government to reap extra £10bn as income tax hits 50pc

Projections from HM Revenue & Customs show that it expects people to pay a total of 161bn in income tax during the 2010/2011 tax year, 10bn more than was paid last year.

The projected income tax take show revenues rising to close to where they were in 2007/2008, before they suffered a drop during the following two years.

There is also expected to be a 400,000 increase in the total number of people paying income tax to 30.6 million.

Britain's 26.4 million basic rate taxpayers will collectively hand over 68.1bn, up from 66.9bn the previous year.

But the bulk of the increase in income tax revenue will come from people paying tax at the 40 per cent and new 50 per cent rates.

The level at which the 40 per cent income tax band kicks in has been frozen this year, leading to more people becoming higher rate

taxpayers, while a new 50 per cent band has been introduced for people earning more than 150,000.

About 3.1 million people will be higher rate taxpayers, collectively paying 50.2bn, while 282,000 people will fall into the 50 per cent income tax band, contributing 42.5bn.

The projections also showed that while people earning 20,000 will pay an average of just 3,350 in income tax, 13,000 people on incomes of more than 1m will hand over an average of just over 1m to the tax man.

Meanwhile, the Association of Chartered Certified Accountants (Acca) claimed that draft legislation being put forward by HMRC may prevent accounts from being able to offer their clients even the most basic tax advice.

The group said the legislation, which is currently being consulted on, classed any tax planning, including using Government incentives, as deliberate wrong doing.

Acca head of taxation Chas Roy-Chowdhury said: "Acca is concerned that even revised proposals will target advisers who counsel on what HMRC call 'unacceptable tax avoidance'.

"With no clear definition of what tax advice is 'unacceptable', there is a strong chance that advisers will be deterred from offering tax advice, for fear of laying themselves open to fines or more critically the business-paralysing removal of all their files and papers by HMRC officers.

"HMRC has already promised to look again at the most controversial elements of their proposals.

"There is a very real risk that they will still want powers to fine and investigate accountants who give perfectly legal tax advice to their

clients."

Acca is calling on HMRC to work with professionals to ensure that any

new powers will only affect agents who are involved in fraud or tax evasion, and that they will not penalise advisers who simply take a different view from HMRC on the legislation.