Millionaire George Osborne denies he’s a highest rate taxpayer

Speaking on the Today Programme earlier, George Osborne has denied he is a highest rate taxpayer who would benefit from the 5% cut he announced yesterday. His £134,565 salary puts him just £15,435 shy of the higher rate (aka additional rate) tax band.

When challenged by Evan Davis that he had other sources of income which would put him over the line, Osborne retorted:

“I’m not, actually.”

But the Register of Member’s Financial Interests reveals he has been in receipt of rent from a property in London since at least July 2011.

What property in London can you rent for less than £16,000 per year?

UPDATE (09:14) »According to DirectGov, rental income is still treated as a business, so not taxed as earned income. Is this how Osborne can make his claims today?

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UPDATE (09:28) »This is the house which Osborne's family lived in until they moved into Downing Street at exactly the same time the rental entry appears on the register. We somehow doubt you could rent this for less than £307 per week.

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UPDATE (09:41) »From DirectGov: “Your taxable profit from property letting is added to your overall income. If this is more than your tax allowances you'll pay tax on it at normal Income Tax rates.” -- unless you've set up some other legal vehicle?

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UPDATE (10:31) »The Guardian's Polly Curtis is reporting that Osborne owns a 15% share in family wallpaper firm Osborne & Little. But the firm made a staggering loss in 2010-2011 and didn't pay dividends, so wouldn't contribute to his taxable income for the last year.

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UPDATE (11:45) »Scrapbook has spoken to a tax expert about methods which Osborne may have used to keep his rental income out of his taxable income. The simplest would seem to be a joint ownership with his wife owning a higher percentage of the property- Osborne then paying tax on less than half of the income. Alternatively, he could have extensively refurbished the property after moving into Number 11, to count the amount of the expenditure as deducatable. Both of these methods are, at present, legal

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UPDATE (14:35) »Looks like it's “no comment” on the cabinet's tax arrangements:

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[blackbirdpie url="https://twitter.com/#!/pollycurtis/status/182833225838764032"]

12 Comments

  1. Sean Ash says:

    A council flat? :D

  2. IanVisits says:

    Depends if the income from the rent covers the cost of the mortgage and a sizeable surplus afterwards.

    Most rental properties don’t generate that sort of annual surplus.

  3. Jill says:

    Surely he would either also be earning substantial dividends/interest on his wealth, or he doesn’t have the financial acumen to be chancellor?

  4. Joe Hill says:

    @IanVisits: mortgage? Both the Osborne family and his wife’s have been millionaires for decades, if there’s any mortgage at all on that flat I bet it’s tiny.

  5. Sam says:

    This is really quite simple. The flat could be owned, for example, by a company which is itself owned by the Osbornes. That company would pay corporation tax on the net proceeds from the property (e.g. after deducting the costs of letting the property and any mortgage – there’s nothing to have stopped them from remortgaging the property). The company could then choose to pay dividends as and when they choose, or could even pay dividends to their children.

  6. Bill Edmunds says:

    I am sure that George Osborne was covered in the Channel 4 program on Tory Tax Avoiders and admitted that he took advantage of Tax Avoidance schemes but added, with a smirk, that it was all perfectly legal and that everybody did it. So that might be the reason he is not a higher rate Tax Payer. In theBudget statement Francis Maude looked very worried when Ed was asking about Cabinet Tax Payers.

  7. Joe Hill says:

    @Sam: yep. It’s almost certainly an arrangement like that. Or to put it another way, the Chancellor of the Exchequer has deliberately arranged his financial affairs so as to (legally) avoid paying tax. Justsayin.

  8. LondonStatto says:

    “the Chancellor of the Exchequer has deliberately arranged his financial affairs so as to (legally) avoid paying tax”

    Quite probably.

    Still, those who wish for the election of Ken Livingstone should probably stay away from this subject.

  9. Paul says:

    Technically Gideon might be right.

    He rented his flat out in July 2011, ie in the current tax year (2011/12).

    He’s just filed his self assessment tax return for 2010/11.

    Technically therefore he’ll not be a higher rate taxpayer until next January when he fills in his self-assessment in January 2013.

    Of course, morally, he should know how much he’s earning from rental income now.

  10. Michael Smith says:

    One assumes that now he’s cut the 50p tax rate to something much more reasonable, he’ll have the incentive he needs to stop using such shrewd tax arrangements.

    Or perhaps the incentive to work a little harder.

  11. Sandie Lunn says:

    I am sure I remember a while ago Dispatches flagging him up as someone who avoids paying his due taxes by using legal loopholes

  12. dai says:

    Why Osborne wouldn’t avoid tax. That would be “morally repugnant”
    ;-)

  13. [...] Programme yesterday that he is not in the 50p tax bracket of those earning £150,000 or more. But Political Scrapbook and Polly Curtis have had fun testing the plausibility of this claim. In addition to his [...]

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