Named the additional rate, the highest rate of Income Tax is 45{11092aa1eab99d85b02efc0ee3c04dc4f5b81bebfc2bd8f608402c1b0eb15b7e}, and some might say 45{11092aa1eab99d85b02efc0ee3c04dc4f5b81bebfc2bd8f608402c1b0eb15b7e} is high enough.
However, if the rate of tax is measured as the relationship between income and tax plus tax related penalties paid, there are times when this 45{11092aa1eab99d85b02efc0ee3c04dc4f5b81bebfc2bd8f608402c1b0eb15b7e} can rise, to as much as 90{11092aa1eab99d85b02efc0ee3c04dc4f5b81bebfc2bd8f608402c1b0eb15b7e}.
For example, if HMRC discovers that a taxpayer has been negligent in declaring all their income for tax purposes, they can charge a penalty. This can be as much as 100{11092aa1eab99d85b02efc0ee3c04dc4f5b81bebfc2bd8f608402c1b0eb15b7e} of the tax due – effectively this doubles the rate of tax charged. And so, if you are paying tax on under-declared income at 45{11092aa1eab99d85b02efc0ee3c04dc4f5b81bebfc2bd8f608402c1b0eb15b7e}, and if a 100{11092aa1eab99d85b02efc0ee3c04dc4f5b81bebfc2bd8f608402c1b0eb15b7e} penalty is levied, the effective rate of tax charged is 90{11092aa1eab99d85b02efc0ee3c04dc4f5b81bebfc2bd8f608402c1b0eb15b7e} of the income declared.
Whilst this may be an extreme example, consider taxpayers whose income exceeds £100,000. For the tax year 2018-19, for every £2 your income exceeds £100,000 you lose £1 of your tax personal allowance. This means that taxable income between £100,000 and £123,700 is taxed at an effective rate of 60{11092aa1eab99d85b02efc0ee3c04dc4f5b81bebfc2bd8f608402c1b0eb15b7e}.
All is not what it seems.