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Accountants for contractors will be deducting more tax from you soon!

Accountants for contractors will be deducting more tax from you soon!

Freelancers could be encouraged to ask for advice from a specialist contractor accountant after one financial body revealed that changes to the income tax bands, due to be introduced in April, will lead to an additional 750,000 paying higher rate tax.

In the coming tax year, individuals earning between £35,001 and £150,000, will be taxed at 40%. Currently, people pay the higher tax band on earnings above £37,400.

The Institute of Fiscal Studies launches its Green Budget today which will also reveal that an additional 850,000 individuals will fall into the higher tax rate bracket within the next 4 years if the coalition meets its targets.

A spokesman from the Institute said that real earnings are expected to remain stagnant but householders will face an additional loss of around £200 a year from benefit cuts and tax increases that come into force at the start of the new tax year. This is on top of the VAT increase and higher energy and import prices.

The wealthiest 10% of the population will also have to pay a new tax rate of 50p in the pound on income over £150,000. This will mean that they are losing 3% of their income compared to the average 1% for the rest of the population.

The tax band changes will mean that 500,000 people do not have to pay any tax at all. April’s increase in the personal allowance from £6,475 to £7,475 is the first step in the government’s plan towards raising the personal tax threshold to £10,000.

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