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Cut in top rate of income tax to 45% comes into effect Cut in top rate of income tax to 45% comes into effect
(about 7 hours later)
A cut in the top rate of income tax from 50 pence in the pound to 45 pence has come into effect.A cut in the top rate of income tax from 50 pence in the pound to 45 pence has come into effect.
The reduction, which was announced by Chancellor George Osborne in his 2012 Budget, affects people with incomes of more than £150,000.The reduction, which was announced by Chancellor George Osborne in his 2012 Budget, affects people with incomes of more than £150,000.
Other tax and benefit changes that start on 6 April include the freeze on the level of income pensioners can receive before they have to pay tax.Other tax and benefit changes that start on 6 April include the freeze on the level of income pensioners can receive before they have to pay tax.
Dubbed the "granny tax", the amount will no longer rise with inflation.Dubbed the "granny tax", the amount will no longer rise with inflation.
The tax allowance level for people aged 65 and older has instead been set at £10,500.The tax allowance level for people aged 65 and older has instead been set at £10,500.
Pension risePension rise
For almost everyone else there's a jump in the tax allowance - the amount people can earn before paying income tax. For almost everyone else the amount people can earn before paying income tax has risen to £9,440, leaving an extra £267 a year in the pockets of millions of basic rate taxpayers.
It has risen to £9,440, leaving an extra £267 a year in the pockets of millions of basic rate taxpayers.
However, the chancellor paid for this cut in part by bringing down the threshold for 40% tax to £41,450, adding 400,000 people to that tax band.However, the chancellor paid for this cut in part by bringing down the threshold for 40% tax to £41,450, adding 400,000 people to that tax band.
Meanwhile, most tax credits and working age benefits, including Jobseeker Allowance, are being increased by a below inflation 1%. Meanwhile, most tax credits and working age benefits, including Jobseeker's Allowance, are being increased by 1% - below the rate of inflation.
Pensioners get a more generous rise in the state pension which goes up by 2.5% to £110 a week. Pensioners get a larger rise in the state pension, which goes up by 2.5% to £110 a week.
Child benefit has been frozen for a third year.Child benefit has been frozen for a third year.
The reduction in the top rate of income tax sparked a political row when it was first announced last year.The reduction in the top rate of income tax sparked a political row when it was first announced last year.
Labour said the coalition government was giving an unfair tax cut to the richest people in the country, while the Conservatives said the 50% level damaged UK growth and competitiveness, making it a less attractive place for overseas investment. Labour said the coalition government was giving an unfair tax cut to the richest people in the country, while the Conservatives said the 50% level damaged UK growth and competitiveness, making Britain a less attractive place for overseas investment.
Conservative Party chairman, Grant Shapps MP, said that all the changes coming into effect on Saturday were "really good for hard-working people". Conservative Party chairman Grant Shapps MP said that all the changes coming into effect on Saturday were "really good for hard-working people".
He added: "Twenty four million people will benefit and a further 2.2 million people will be taken out of that tax entirely under this measure today." He added: "Twenty-four million people will benefit and a further 2.2 million people will be taken out of that tax entirely under this measure today."
However, shadow chancellor Ed Balls said that as a result of the changes, working families would be up to £4,000 worse off, while millionaires get average tax cuts of £100,000.However, shadow chancellor Ed Balls said that as a result of the changes, working families would be up to £4,000 worse off, while millionaires get average tax cuts of £100,000.
Mr Balls added: ""The whole country will today see whose side this Conservative-led government is really on and who is paying the price for their total economic failure."Mr Balls added: ""The whole country will today see whose side this Conservative-led government is really on and who is paying the price for their total economic failure."
Regarding the freezing of the tax allowance for pensioners, Labour say it is an unfair attack on elderly people. The Conservatives counter that the allowance level remains higher than for people of working age, and that the government had increased the state pension by more than the former Labour government had planned. Labour says the freezing of the tax allowance for pensioners is an unfair attack on elderly people. The Conservatives counter that the allowance level remains higher than for people of working age, and that the government has increased the state pension by more than the former Labour government had planned.