Labour may raise top rate of income tax to 45%

The Labour government may break a previous election manifesto promise by increasing the top rate of income tax to 45% for those earning over £150,000 per year.

Although the government is not confirming this tax increase, the BBC is reporting that the 45% rate will not apply until after the next election, thereby giving Labour the mandate from the electorate to proceed with this controversial measure.

Annual earnings of £150,000 or more represent only a small percentage of tax payer salaries, so increasing the top tax band is likely to have only a small impact in repaying the considerable borrowing that the government is currently undertaking in a bid to minimise the effects of the recession.