Global tax rates for top earners have risen by an average of 0.3 percent this year for only the third year in a decade, with the last time being in 2010, when governments tried to consolidate their deficits.
This year, as a result of global economies not recovering from the financial crisis, a further rise has occurred, with France increasing its top rate from 41 percent to 45 percent, although new President Francois Hollande is set to bring in a 75 percent rate for taxpayers earning over €1m next year.
Similarly, Spain has effectively increased its rate from 45 per cent to 52 per cent for anyone earning over €300,000, which means that the country has leapt up the tax rankings to number three from its position at number 10 last year.
The UK, however, has dropped in the rankings and will fall even further next year when the top rate of tax reduces to 45 per cent from 50 per cent, which will mean that our rate will be closer to the EU average, which is around 42 per cent.
The fall in ranking is good news for the UK’s top earners, as in these days of fast connections and cloud computing, high net worth individuals can be flexible in their choice of home location. So if more people choose to be a tax resident in the UK, it will also be good news for the Treasury.
However, as well as the tax rate, people should also take into account social security taxes, as households earning £50,000 or more will lose out on child benefits, for example. Based on a combined social security and income tax rate, the UK ranks lower than countries such as Italy, Germany, Belgium and Poland.
As an accountant in Bristol, Elaine Durrant specialises in offering tax advice, guidance and support to businesses and individuals.