City partners earning £1m will save around £42,000 a year as a result of the reduction in the top tax rate announced in Chancellor George Osborne's Budget earlier this week (21 March).

Osborne's move to cut the top 50p tax rate to 45p from April 2013 means partners under 65 earning £1m each year will see their tax liabilities (including national insurance) for 2013-14 drop to £458,406, compared with £500,553 in 2012-13.

Figures compiled by professional services firm Smith & Williamson predict equity partners earning £850,000 will see their tax bill shrink by £34,647 to £387,906 in 2013-14, while salaried partners on an income of £250,000 will take home £4,647 more in 2013-14.

The change in taxation will have less effect at the lower end of the pay scale, where those earning £200,000 will be £2,178 better off.

Those earning between around £120,000 and £158,000 will see a slight increase in their tax bill as a result of changes included in the budget such as the slight reduction in the higher tax threshold. This means that an associate on £150,000 will pay £322 more in tax in 2013-14.

Smith & Williamson national tax director Richard Mannion said: "Treasury officials believe it will raise more money despite the cut simply because fewer people will avoid paying it. The 50p tax raised only a third of its intended target with a massive £16bn deliberately shifted to avoid the charge and Osborne has argued that cutting the higher rate to 45p would only cost the exchequer £100m.

"I am sure lawyers will welcome the reduction in the top rate of income tax. Interestingly, the introduction of the 50p rate had encouraged many firms to set up service companies; the merits of these arrangements will remain strong."

Private client lawyers look set to see a significant increase in work over the coming months as a result of the Budget, which saw measures affecting high net worth individuals taking centre stage.

Most notably, private client and real estate partners will find themselves advising clients in relation to the introduction of a 7% rate of stamp duty on property sales over £2m, and Osborne's plans to crack down on stamp duty avoidance among the rich by preventing individuals from placing expensive property into offshore companies. Those choosing to buy property through such companies face a 15% tax rate.