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Cameron pledges £50k higher rate tax threshold

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1st Oct 2014
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A future Conservative government will increase the personal allowance to £12,500 and the higher rate threshold to £50,000 by 2020, David Cameron has announced.

Paul Johnson, director of the Institute for Fiscal Studies, told the BBC that the income tax cuts would cost £7bn, more than double the amount of welfare savings announced by George Osborne on Monday.

Finance Act 2014 increased the personal allowance to £10,500 for 2015/16. The higher rate threshold – the sum of the personal allowance and the basic rate limit – is currently £41,865 and is set to rise to £42,285 for 2015/16.

The prime minister, addressing the Conservative party conference, said: “Once you have a job, I want you to take home more of your own money. If you put in, you should get out – not hand so much of it to the taxman.

“That’s why these past four years, despite everything, I’ve made sure we provide some relief to taxpayers in our country – especially the poorest. No income tax until you earn £10,000 a year – and from next April, £10,500 a year …”

A future Conservative Government will raise the tax-free personal allowance from £10,500 to £12,500, he said.

“That will take 1m more of the lowest paid workers out of income tax – and will give a tax cut to 30m more. So with us, if you work 30 hours a week on minimum wage, you will pay no income tax at all. Nothing. Zero. Zilch.”

‘I want to bring back some fairness’

“The 40p tax rate was only supposed to be paid by the most well-off people in our country,” Cameron said. “But in the past couple of decades, far too many have been dragged into it: teachers, police officers …

“I want to take action that’s long overdue, and bring back some fairness to tax. With a Conservative government, we will raise the threshold at which people pay the 40p rate. It’s currently £41,900 – in the next Parliament we will raise it to £50,000.”

A £50,000 threshold would pull “hundreds of thousands” out of the teeth of the higher rate “trap”, said Simon Gompertz , the BBC’s personal finance correspondent. “But as with all tax measures, it will be vital to watch how they are implemented. The longer it takes to bring them in, the less they are worth.”

Corporation tax

Cameron told the conference that companies were “coming from all over the world to invest and create jobs here”.

“That’s not happened by accident,” he said. “It’s because they see a government rolling out the red carpet for them, cutting their red tape, cutting their taxes. So here is a commitment: with the next Conservative Government – we will always have the most competitive corporate taxes in the G20. Lower than Germany, lower than Japan, lower than the United States."

Incentives

John Cridland, CBI director-general, said: "A job is the best route to prosperity and business supports stronger incentives for people to get a job and get on in work.

"At the same time, we need more investment to create more jobs, so pledging to keep the UK corporate tax rate the most competitive in the G20 will send out a clear positive signal to businesses.”

Andy Chamberlain, senior public affairs manager at the Association of Independent Professionals and the Self Employed (IPSE, formerly PCG), said Cameron’s commitment to lower personal and business taxes would help to create an environment “conducive to enterprise”.

The Guardian quoted Frances O'Grady, TUC general secretary, as saying that the chancellor on Monday had “promised to take cash from the working poor to pay for tax breaks for the richest pensioners”.

She added: “The prime minister’s tax plan is all about help for the better off. Raising the personal allowance and the higher rate tax threshold both help those well above poverty levels.”

‘Shameless’

Danny Alexander, the Liberal Democrat chief secretary to the Treasury, accused the Conservatives of a “shameless attempt to copy” Liberal Democrat policy.

“The Conservatives opposed increases to the tax threshold at the last election. The big tax cuts for 25m working people in this Parliament have only been delivered because of the determination and commitment of Liberal Democrats to fight for them every day,” he said.

The plan to increase the higher rate threshold to £50,000 “means that the working-age poor are being asked to fund a tax cut that is four times greater for higher rate taxpayers than for basic rate taxpayers”.

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Replies (12)

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By neiltonks
01st Oct 2014 13:11

Election ahead!

The current government has spent much of its time in office reducing this threshold. It stood at £42,475 when they came to power in 2011/12 and is now £41,865, after being down at £41,450 last year. So has Cameron suddenly seen the light and realised that middle earners are suffering, or has he just seen an election on the horizon??

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By davegibson00
01st Oct 2014 13:51

Don't get excited and do the maths

Over the life of the next parliament is about 3.5% a year, the same as Ed's £8 minimum wage soundbite.

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By johnjenkins
01st Oct 2014 16:04

Methinks

DC knows he won't get a majority so he's going for another coalition with Cleggy (and perhaps Nigel). I certainly agree with Danny Alexander.

I have never seen the logic in a higher rate tax band. I understand why but the logic is wrong.

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By GeorgeS
01st Oct 2014 16:23

Got my vote

Could save me £1,500 a year in tax. Seeing as my tax bill has gone up £2,000 over the life of this parliament, that saving would be appreciated.

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By johnjenkins
01st Oct 2014 17:35

@George

Ah but it's not a saving is it? It just means that your tax bill has gone up £500.

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By GeorgeS
01st Oct 2014 18:46

@johnjenkins

A saving on what I currently pay though.

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By Minnie136
01st Oct 2014 21:39

Solution

Why not just reduce the pay of the public sector workers to take them out of the higher rate tax band, that way you save more than £7bn...

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Chris M
By mr. mischief
02nd Oct 2014 05:53

Further solution

Pay all HMRC management on a commission only basis directly related to "customer" satisfaction.  That way you reduce their salaries from £100k or so to the minimum wage, must be a few billion saved there!

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By ireallyshouldknowthisbut
02nd Oct 2014 09:08

.

All of this makes it much harder to combine NI and income tax which ought to be the main tax goal as presumably in order to make the headline grabbing figures work NI will trundle along well below the personal allowance. 

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By johnjenkins
02nd Oct 2014 09:27

Dc will come along

(if he gets into power) and say the same as Twoeds that if we want a decent NHS, until the economy can take it, we will put up NI.

It is very easy to scrap NI but, of course, HMRC would lose their little extras with expenses etc. so it will never happen.

No Government wants to be judged on the basic rate, because if they want a second term, then they would have to tighten their belts in the first term.

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By frankfx
02nd Oct 2014 22:52

a 1% hike in interest rates

A Modest increase in interest rates will wipe out any tax savings.

The tax saved will then be recycled to the bailed out financial institutions

Of course a good dose of inflation and high interest rates , coupled with a tax giveaway will soon have us begging for more austerity and intervention by the government to the now independent Bank of England.who are tasked with saving us from boom and bust,yes?

So there will be a narrow band of winners, as usual.not the millions the vote bribers would have you believe.

De ja vu

 

 

 

 

 

 

 

 

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By sosleepy
03rd Oct 2014 13:27

Easy money

NI and real actual tax on dividends

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