The UK is now one of the highest taxed countries in the world, according to a new report, which has a significant impact on the finances of contractors and other professionals in the country.

In a report entitled The Revenue and Growth Effects of Britain's High Personal Taxes, think tank the Adam Smith Institute showed that the top one per cent of UK taxpayers will contribute 25 per cent of total income tax in 2010-2011.

The report also warned that the 50 per cent top rate of tax could cause many high earning contractors and other professionals to take legal tax avoidance action.

According to the report, "survey evidence from finance, industry, sport, entertainment and elsewhere tell us that high-earners are inclined to take the rational course of minimising their tax liability."

Meanwhile, Gerry McLaughlin from ITContractor.com has said contractors are hoping that a review of the small business tax will bring some certainty and put to bed worries about the problematic IR35 system.