Dump 50p tax rate, think tank urges Chancellor

Chancellor George Osborne should abolish the 50p top rate of income tax in his Budget later this month, a free-market think tank has said.

The Adam Smith Institute said the 50p rate on incomes over 150,000 would cost the government 350 billion and lead to flat economic growth over the next decade as high-earners fled overseas and used tax avoidance strategies to protect their income.

It also called on Mr Osborne to cut the 40 per cent higher rate of income tax to 35 per cent, dump the 30,000 charge for "non-doms", reduce capital gains tax from 28 to 18 per cent and restore personal allowances for those earning over 100,000.

It said Britain was 83rd out of 86 leading economies for its top income tax rate - with only the Netherlands, Denmark and Sweden taxing high-earners more.

It quoted historical evidence from around the world showing increasing taxation above a certain "tipping point" reduces both the total tax take and the proportion paid by the rich.