The Chancellor, George Osborne said that this new level of top tier tax will hopefully encourage top earners to stay in the UK.
The government said that the rate cut would improve competitiveness, encourage entrepreneurship and support growth.
The 45% level will put the UK’s top statutory rate of personal income tax below that of Australia, Canada, France, Germany, Italy and Japan.
Osborne said: “A 50p tax rate, with all the damage it does to Britain's competitiveness, can only be justified if it raises significant sums of money.
“HMRC found that an astonishing £16bn of income was deliberately shifted into the previous tax year - at a cost to the taxpayer of £1bn, something that the previous government's figures made no allowance for.
“The increase from 40p to 50p raised just a third of the £3 billion we were told it would raise.”
Osborne added that the direct cost between 45p and 50p was only £100m a year and that HMRC calculated the loss of other tax revenues may have even cancelled that out.
He said: “In other words, it raises at most a fraction of what we were told - and may raise nothing at all.”
“So from April next year, the top rate of tax will be 45p.
“No Chancellor can justify a tax rate that damages our economy and raises next to nothing. It is as simple as that.”
#Budget2012
#Budget
