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Cap needed to prevent wealthy paying less tax

Almost one in 10 people earning more than £10m a year are paying an effective tax rate of less than 20%, the Treasury has revealed.

The figures were released to support Government plans to limit tax relief, including on charitable donations.

From 2013, previously uncapped tax reliefs, including charitable donations, will be capped at £50,000 or 25% of the person’s income, if that is higher, it was announced in this year’s Budget.

However, charities and many MPs, including two-thirds on the Coalition backbenches according to one survey, are concerned that this could damage the amount of money people donate to charity.

The National Council for Voluntary Organisations’ chief executive Sir Stuart Etherington said: “There have been disgraceful government attacks on charities and the motivations of people who give to them in recent days. The generous should be supported, not pilloried.”

And Oxfam finance director Bob Humphreys said: “We know from speaking to our high-level supporters that the tax relief cut will certainly influence their thinking and potentially affect their donations.”

The Treasury figures showed that 6% of the £10m-plus earners paid less than 10% in tax and another 3% paid less than 20%. They also showed that fewer than three-quarters of high earners paid more than 40% in income tax.

A Treasury spokeswoman said: “There are currently millionaires paying a lower tax rate than ordinary taxpayers. This is the system we have at the moment, but the Government is committed to making it fairer. We’re capping benefits and these figures clearly show why it’s fair to cap tax reliefs for the wealthy as well.”

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