High I-T rate makes life tough in London

: The UK government’s decision to raise the top rate of income tax will leave residents earning more than £1 million ($1.6 million) a year worse off than they would be in any of the world’s other major financial centres. “People feel let down,” Nick Bacon, a London-based financial services tax partner at accounting firm KPMG, said in an interview. “They thought that the UK could always be relied on as being tax-friendly.”

The UK government will raise the top rate of income tax to 50 % in April, making London more expensive for residents earning £1 million a year than New York or Hong Kong, according to KPMG estimates. A London banker on that amount will pay £491,278 in income tax and social security payments from April, three times more than in Hong Kong and £58,500 more than in New York, the data show.

Prime Minister Gordon Brown, facing an election by June, pledged last year to make the finance industry “the servant of people and industry, and not their master” after bailing out banks with more than £1 trillion of taxpayers’ money. Firms such as Tullett Prebon Plc, which acts as a go—between between banks trading securities, and hedge fund operator BlueCrest Capital Management said they may move some operations overseas to avoid the tax increases.

The UK government will raise the top rate of tax to 50% from 40 % on incomes of more than £150,000. That will cost anyone earning £1 million a year about £87,588 more in tax, according to KPMG’s estimates. “The recession that cost many Londoners their jobs was caused in the finance sector. It is only right that super-rich now make a fair contribution to putting right the damage.” said Brendan Barber, general secretary of the Trades Union Congress, whose members fund the annual budget of Labour Party.