Lots of fuss over the last couple of days about the idea that businesses like Goldman Sachs might delay paying bonuses until 6 April so that they're taxed on the recipient at 45% rather than 50%.
Well, yes, that's what happens when you change tax rates. Behaviour changes too. When the rate went up to 50% from 40%, the opposite happened - people paid bonuses earlier to take advantage of the lower rate. It's basic tax planning, and it's naive to think that people won't wait a couple of months in order to save £20,000. In this case, GS may well be bullied into not delaying, but there will be plenty of lower-profile businesses who will certainly delay. They'd be crazy not to.
Most people have a pretty fixed income, little choice about its timing, and the 45%/50% dilemma isn't something that is of concern to them. But that isn't the case for everyone. For many business owners and high earners, incomes aren't a fixed amount that get taxed at whatever the rate happens to be at the time. There's often flexibility over timing and any sensible person is going to at least consider the implications.
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