Mar 2011 14

Listen to Clegg on the personal allowance, Mr Osborne11

The Deputy Prime Minister Nick Clegg has signalled that the Government will announce another increase in the personal allowance. The amount of money people can earn before they start paying tax is already scheduled to increase in 2011-12 by £1,000 from £6,475 to £7,475. But Liberal Democrats want it to rise faster to over £8,000. Mr Clegg said:

“We are already shaping government tax policy and will continue to do so in the years to come. We will take real steps every year, including in the Budget in 10 days time, towards our goal that nobody earning less than £10,000 pays any income tax at all.”

Worth less with each year

The Liberal Democrat leader is right to call for a faster rise in the personal allowance. But £8,000 in 2011-12 is not enough and should not be counterbalanced by dragging more people into the higher 40 per cent rate. The Liberal Democrat manifesto included a pledge to increase the personal allowance to £10,000 in 2011-12 and they should persuade their coalition partners to adopt that policy. As I have previously said, £10,000 in the future is not the same as £10,000 today. In fact, with earnings predicted to rise by 21% by 2015-16 a £10,000 personal allowance then would be equivalent to just £8,264 now.

Increasing the personal allowance to £10,000 now would go a long way to making work pay for those who want to return to work and would lift a heavy burden for hard working people on low and ordinary incomes. It should be implemented in full, not watered down.

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  • Carl

    The commensurate decrease in the higher tax threshold is pretty relevant as well though, surely?

  • http://twitter.com/GawainTowler Gawain Towler

    Maybe he should listen to UKIP not the Lib Dems. After all we propose a lifting of the allowance to £11,500 and have no nasty surprises like bringing in more people into the 40% bracket, but move towards a flat tax of 31%.

  • http://twitter.com/GawainTowler Gawain Towler

    Maybe he should listen to UKIP not the Lib Dems. After all we propose a lifting of the allowance to £11,500 and have no nasty surprises like bringing in more people into the 40% bracket, but move towards a flat tax of 31%.

    • Anonymous

      I agree on the flat tax rate but 31% is too high. 18% would be a better figure, along with radical reductions in VAT – to 5%, corporation tax to 10% and an end to council, rates and fuel duty taxes.

      In return the state goes through a blender.

  • http://twitter.com/GawainTowler Gawain Towler

    Maybe he should listen to UKIP not the Lib Dems. After all we propose a lifting of the allowance to £11,500 and have no nasty surprises like bringing in more people into the 40% bracket, but move towards a flat tax of 31%.

  • John Wilkinson

    Another UKIP policy !

  • Daedalus

    The 50% tax rate is a disgrace; but the fact that someone working a 40 hour week on the minimum wage is paying any tax at all is totally abhorent. This is just over £12,300 a year, why are they paying tax? I am not for the minimum wage in any form I just think that we need to have a real debate as to what we want our tax system to do, personally I would like to see the threshold raised to £15K and have it fully transferable between MARRIED couples. Then get rid of tax credits.

    Daedalus

  • Cervino99

    The fact that people still pay tax (NI) on earnings of just over £5k / yr means that the commitment hasn’t really been met. We must keep making the point that NI should be merged with Income Tax to stop politicians from misleading the taxpayer. and using NI as a stealth tax.

  • Stuart M.

    10k per year is welcome, but in reality too low. At the very least poerson allowance should be pegged to 40 hrs work/week at minimum wage.

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  • Anonymous

    Thing is, the stealth tax of raising NI will counter balance the “allowance” (am I the only person who hates that phrase) increase. That combined with the malicious widening of the 40% bracket in practice equates to an overall tax increase.

    Taxes in the UK are too high, far too poorly spent with too little redress made to those spending frivolously.