Developing

Budget 2012 decision time over 50p rate

By politics.co.uk staff

Conservative and Liberal Democrat leaders in the coalition are negotiating the fate of the 50p top rate of income tax ahead of next week's Budget.

Tory chancellor George Osborne and his Lib Dem chief secretary to the Treasury Danny Alexander are being joined by David Cameron and Nick Clegg for talks about the controversial measure.

The final decision of the 'quad' must be made by the end of the day as the Office for Budget Responsibility needs time to prepare its forecasts, to be published alongside the Budget next Wednesday.

Conservative calls for the 50p rate to be abandoned are being met by demands from the Lib Dems that other measures be found to tax the wealthiest.

The coalition's junior party has been calling for measures like a 'mansion tax' on the most expensive properties, or dropping pension tax relief on those earning over around £48,000, for weeks.

But it is now possible that they may be forced to accept a review of tax measures affecting the wealthiest in society instead, according to reports.

Another compromise could see the 50p top rate reduced to 45p. Labour had raised the upper tax band from 40p to 50p in 2010-11 for people earning more than £150,000 a year.

An HMRC study set to be released next week is set to reveal that the top tax tier is raising significantly less than the £2.6 billion in revenue originally predicted by the Treasury.