Conservative tax allowance promises announced
01 October 2014
The Prime Minister has announced planned changes to the personal tax allowance and the higher rate threshold to take effect if the conservatives win the next election.
Many thanks to The Times for their report of the announcement:
Future tax cuts for low earners and middle-class families formed the centrepiece of David Cameron’s election pitch to voters today. In his last conference speech before the election, the prime minister said that he aimed to take anyone paid the minimum wage out of paying any income tax. However, in the biggest surprise of his address, he also revealed that he would help higher earners by ensuring that only those earning more than £50,000 a year would pay the 40 per cent tax rate in the next parliament.
Mr Cameron warned that many middle-class workers, such as police officers and nurses, had been dragged in to paying the higher rate, which kicks in at £41,900 a year. He said the cut, which has been demanded by Tory backbenchers, was “long overdue”.
“You never pull one person up by pulling another down,” he said. “This party doesn’t do the politics of envy and class war. We believe in aspiration and helping people get on in life.”
In a move to cut taxes for the lowest earners, workers would eventually only pay income tax once they earned more than the minimum wage level of £12,500 a year. The threshold is currently £10,000 a year and will go up by another £500 next April.
The prime minister vowed that tax cuts could only be introduced as the deficit was cut. He again promised to balance the books by 2018. The cuts will be expensive to fund and Mr Cameron gave no details about how it would be done.
Tory sources said that the package of tax cuts would cost a total of £7.2 billion. They said raising the basic rate threshold to £12,500 costs £5.6 billion. Raising the higher rate to £50,000 costs £1.6 billion.
The average basic rate taxpayer will be £500 better off under the plans, sources added, but higher rate taxpayers will be almost three times as much better off, gaining an extra £1,313 from the plans, while 800,000 people would be taken out of the 40p tax bracket altogether.
“Here’s our commitment to the British people: no income tax if you are on minimum wage,” he said. “A £12,500 tax-free personal allowance for millions of hardworking people. And you only pay 40p tax when you earn £50,000.