Looks as though the Government has done more or less what I hoped for and raised the tax threashold.
The Chancellor is today announcing that at a cost of £2.7 billion, he will increase the personal tax allowance by £600 to £6035 for this financial year, benefiting all basic rate taxpayers under 65.
This will mean that 22 million people on low and middle incomes will gain an additional £120 this year to offset their average loss due to the phasing out of the 10p tax band. The tax liability of everyone that currently pays tax at 40 per cent will be unaffected by the increase in the personal allowance
It will also mean that 4.2 million households out of the 5.3 million households will receive as much – or more than – they originally lost, with the remaining 1.1 million households seeing their loss at least halved. 80 per cent of households are fully compensated with the remaining 20 per cent compensated by at least half. And in addition 600,000 people on low incomes will be taken out of tax altogether.
People aged between 60 and 64, whose average loss was £100 will also get the advantage of the increased personal allowance worth up to £120. They also receive the additional £50 Winter Fuel Payment for this year, which was announced in the Budget.
The increased personal allowance will apply to all income for this tax year and so will be backdated to 6 April. For future years the Government’s aim is to continue the same level of support for those on lower incomes. The Chancellor will bring forward proposals to do this at the Pre-Budget Report.
This measure represents the fairest and most effective way to help all those affected as a result of the changes proposed last year. In addition, this family tax cut provides support this year for those on middle incomes at a time where they face increased bills, so supporting the economy.
Key facts
From September basic rate taxpayers will see a one-off increase in their monthly income of £60 and then an increase of £10 per month for the rest of the financial year.
The tax liability of everyone that currently pays tax at 40 per cent will be unaffected by the increase in the personal allowance. As the £600 increased personal allowance applies not just to basic rate taxpayers but also to those paying tax at a higher rate, the Government will reduce the threshold at which an individual starts to pay tax at the higher rate by £600.
· Those brought into the higher rate will still gain by up to £120 this year.
· The Government is able to finance this proposal through borrowing. It is sensible to allow borrowing to rise and investment to be maintained as the economy slows. Debt is lower than in the past and low by international standards. Our fiscal policy, like our monetary policy, is designed to support stability in these uncertain economic times generated by the turbulence in the financial markets and global commodity price inflation.
Raising allowances is simpler than other solutions. The Government considered the administrative practicalities of other options that were suggested, including a one-off rebate or compensatory payment as well as changes to the tax credit system to allow the average losses to be offset. However, we found that a rebate scheme would be complex and expensive to administer. It would also take time to set up and changes to the eligibility for tax credits could not be introduced this year.
The Tory’s ‘tax bombshell’ reprise is a joke
3 hours ago
7 comments:
For one year only (like the increase in winter fuel payments for this coming winter) and paid for through increased borrowing, and therefore breaching the Governments own rules on financial control.
The curious ramifications is that next year the personal tax allowance will go down and everyone will have to pay significantly more tax...
Its even more modest than your idea and paid for by spending money the Government does not have and will have to recoup from future tax receipts. Its already spent tens of billions extra through borrowing and as the Times explained last year, those figures are increasing far beyond expectations.
This is not even borrowing to invest. This is borrowing to give a tax cut, breaking an old rule of the Governments.
More importantly, what a CODS UP the whole affair was. Its a bit like putting dracula in charge of the blood transfusion service.
What’s in the kitty Darling?
I believe the BBC put the spare cash figure at £100 million though Im not so sure about that figure, Michael. It sounds rather optimistic since Government borrowing seems set to top £45 billion this financial year, well past forecast figures.
James Ken David, I think what government both national and local is not properly addressing, is not so much fiscal tweaking but the way the society we live in is changing for the worse, while in many other countries this does not seem to be happening.
We have, for instance two new classes in our society, one entirely dependant on benefits, with no stake in society, many engaged in low level antisocial behaviour, who are unlikely to vote in any election and another group, engaged in non productive employment, many earning in the range of £1,000 per week.
The ordinary citizens of the country, working hard for ordinary wages resent this type of thing.
I'm afraid it has always been so Michael. What is different is that modern developments have enabled the rich to isolate thenselves from the lives that the bulk of people lead to a greater and greater extent. This coupled with the effect of mass cumunication which makes everyone only too aware of the contrasts in wealth in our world and this country leads to greater disatisfaction.
At least New Labour has done one thing and that is to move things on from the Thatcherite "no such thing as society". It is disappointing, though perhaps understandable that progress beyond that is so slow. However if improvement depends upon better education health and housing then slow progress is all we can hope for.
If someone is to use that Thacther line, they should at least spend the time to understand what she meant, rather than keeping it out of context for political expediency.
The passage continues "There is living tapestry of men and women and people and the beauty of that tapestry and the quality of our lives will depend upon how much each of us is prepared to take responsibility for ourselves and each of us prepared to turn round and help by our own efforts those who are unfortunate. And the worst things we have in life, in my view, are where children who are a great privilege and a trust—they are the fundamental great trust, but they do not ask to come into the world, we bring them into the world, they are a miracle, there is nothing like the miracle of life—we have these little innocents and the worst crime in life is when those children, who would naturally have the right to look to their parents for help, for comfort, not only just for the food and shelter but for the time, for the understanding, turn round and not only is that help not forthcoming, but they get either neglect or worse than that, cruelty. "
Its about responsibility for ourselves and for those who need our help most, in her mind the children who desperately need to be cared for. Labour disagrees with it because it sees the individual as being part of a State controlled system.
In light of the example Thatcher gave, check out the latest figures for looked after children published by the DCSF recently. Is it that good that Labour moved on from Thatcher's idea?
Post a Comment