suit

In 1974 the UK’s top marginal tax rate of 83% applied to incomes over £20,000 (equivalent to £200,000 in 2018). In addition, passive investment income was hit with a 15% investment income surcharge which took the top rate to 98%. In 1974 750,000 people were in the 83% plus tax bracket.

During this time senior executives complained at the amount of pre-tax income they had to earn to afford the after tax cost of a new suit. With the 83% tax rate, purchasing a new three piece suit at the average cost of £45, required earning £265 in pre-tax wages. As a result, clever accountants started offering suit leasing schemes.

The suit leasing scheme involved the executive going to a tailor and having the employer purchase their suit. The employer would then lease the suit to the executive. This was tax effective as the employer would receive a tax deduction for the suit purchase, but the executive was only taxed on the value of the use of a second hand suit.

Made to measure suits naturally had limited use to others and therefore had a low second hand value. It worked extremely well with hugely fat, thin, or long limbed executives as their tailored suits had almost no value to anyone else.