UK May Raise Tax Threshold To GBP10k

by Robert Lee, Tax-News.com, London

09 January 2009

The first GBP10,000 of a taxpayers income may become tax-free in the UK under a proposal being considered by Prime Minister Gordon Brown to dramatically raise the UK tax allowance.

John McFall, the Chairman of the influential Treasury Select Committee and a key ally of Brown, revealed yesterday that the idea was "in the Prime Minister's mind" and could form part of new tax cut measures aimed at propping up the economy to be announced in the next budget later in the year.

Currently, the personal tax allowance (the part of a taxpayer's earnings that is free from income tax before they start paying the basic 20% rate) stands at GBP6,035 for taxpayers under the age of 65. This is due to rise to GBP6,745 in 2009/10.

Raising the tax allowance by almost GBP4,000 would be a popular measure as it would leave millions of low-paid workers with little or no income tax liability. The measure would also represent a substantial tax cut for those in higher incomes, and could appease critics of the government's decision to abolish the 10% starting rate of tax after the 2007/8 tax year, which applied to the first GBP2,230 of taxable income.

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