Income Tax: Tax Allowances

Treasury written question – answered on 3 March 2009.

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Photo of Stephen Byers Stephen Byers Labour, North Tyneside

To ask the Chancellor of the Exchequer what increase in the personal income tax allowance would be achieved at a cost of £8.6 billion in 2009-10; and how many people would be removed from any income tax liability as a result of such an increase.

Photo of Stephen Timms Stephen Timms Financial Secretary (HM Treasury) (also in the Department for Business, Innovation and Skills)

Raising the personal allowance by £1,520 to £7,995 for 2009-10 would cost around £8.6 billion and take approximately 1.7 million people out of income tax. This estimate is based on the 2005-06 Survey of Personal Incomes projected forward using pre-Budget 2008 assumptions. It refers only to income tax, not National Insurance contributions, and excludes any estimate of behavioural response.

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Kenneth Armitage
Posted on 5 Mar 2009 7:52 am (Report this annotation)

Instead of pussy-footing around with income taxation and incremental increases in the personal allowance it is time that the personal allowance was raised to £12,000 a year such that anyone on the minimum wage is not liable for income taxation; and, because everyone would benefit from such a move for any shortfall to the treasury to be taken from the higher end from those paid more than £50,000 a year.

That way would put more money into the pockets of the people and especially those in the lowest two quintiles who spend everything they have to exist and more especially to pay for food, utility bills and the iniquitous Council Tax, which is not based on income and revenue, and could even kick-start the economy.

In addition, it would reduce time and effort for those on low and poor incomes having to complete and submit copious forms to claim back what they have already paid in income taxation and relief like tax credits, income support and other allowances; and, it would reduce the need for over-manning in the civil servants who spend their time reading and assessing claims in order to approve additional allowances. Besides, the various and nefarious schemes like child allowance, child tax credits, tax credits and the sure start programme have been proven to be wide open to abuse, even from foreigners whose families do not reside in this country.