Tories Unveil Income Tax Cutting Options

by Robert Lee, Tax-News.com, London

11 November 2004

The UK Conservative Party has begun an extensive consultation into how the British tax system can be made fairer, and has unveiled a range of options aimed at lifting the tax burden for both low and middle income earners.

A consultation published by the Shadow Chancellor, Oliver Letwin, focuses strongly on low paid workers who have in recent years been pushed into the tax net, and middle income individuals whose earnings have dragged them into paying the 40% top rate of income tax, which becomes payable at £36,000.

Under proposals being studied by the Tories, the upper threshold could be lifted to £40,800.

To hone its policy on taxation, the Party plans to release eight consultation papers over the coming months, concentrating on inequity in the tax system.

To this end, a paper published on Tuesday, entitled ‘Income Tax and National Insurance Thresholds - A New Direction,’ suggests five options towards creating what the Tories deem a fairer system. These include:

• Indexing the personal allowance and the national insurance threshold to earnings rather than prices, thus stabilising the number of people paying tax, at a cost of £0.5 billion;
• Raising personal allowances and the national insurance threshold to the point where someone on the minimum wage, working 20 hours a week becomes exempt from paying national insurance and income tax, a measure costing £3.7 billion;
• Restoring the income tax personal allowance and national insurance so that the same proportion of people pay it as did in 1997, meaning only those earning more than £5,318 would pay tax, a measure costing £6.7 billion;
• Indexing the income tax basic rate limit to earnings rather than prices, costing £0.2 billion; and
• Restoring the income tax basic rate limit to the same ratio of full time average earnings that the Labour Government inherited in 1997, costing £2.6 billion.

“By stealthily raising thresholds more slowly than the increase in earnings, Tony Blair has dragged 4.2 million more people into paying income tax, and 1.35 million more people into paying top rate income tax," Mr Letwin argued, adding:

"Part-time workers on the minimum wage are now paying tax, and deputy head teachers are paying top rate tax. A change of direction is needed to help people on lower incomes and people trapped in top rate tax."

.

Recommended

Write a comment