New UK Government Tax Cut, Annual Tax Free Allowance to Rise to £10,000

Politics / Taxes May 11, 2010 - 05:44 PM GMT

The New Conservative / Lib-Dem coalition UK government is expected to cut UK taxes for most tax payers by £705 per year as part of coalition deal. The Lib-Dem Tax cut policy to be phased in over x years will take the form of the annual tax free allowance rising from £6,470 to £10,000 which is aimed at lifting the low paid totally out of income tax, however it will at the same time benefit all tax payers.

The £17 billion tax cut to be phased in will be financed by a series of separate tax rises that will hit the higher paid who will finance the tax cut, details of which will be announced in the emergency budget within 50 days.

Effect of the Lib Dem Tax Cut.

Gross Earnings	Current Income Tax Tax	New Income Tax	Better Off by
£10,000	£705	£0	+£705
£15,000	£1,705	£1,000	+£705
£20,000	£2,705	£2,000	+£705
£25,000	£3,705	£3,000	+£705
£30,000	£4,705	£4,000	+£705
£50,000	£9,930	£8,520	+£1,410

The above excludes NI tax which is expected to rise, i.e. average basic rate tax payers will thus see little overall change.
Excludes higher rate tax rises still to be announced.
Excludes inpact of stealth tax rises such as VAT.
Implementation is pending details of how the tax cut will be phased in, i.e. over how many years.

Once the exact details of all tax proposals have been announced in the emergency budget within 50 days, then it will become clear how far the overall tax burden for those earning more than about £15,000 per year will rise, and significantly so for the higher paid.

Source: http://www.marketoracle.co.uk/Article19406.html

By Nadeem Walayat

http://www.marketoracle.co.uk

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on UK inflation, economy, interest rates and the housing market and he is the author of the NEW Inflation Mega-Trend ebook that can be downloaded for Free. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 500 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

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Comments

Dr Ray 12 May 10, 11:42	personal allowance for the higher paid Don't forget that the last budget abolished personal allowances for the higher paid (£100K +)so they may not be better off at all with the new proposed threshold.
Nadeem_Walayat 12 May 10, 19:34	UK Taxes Yes a lot of tax rises are due to hit which ensure that in the end only those that earn UNDER £15k will be better off. Offcourse even these may see a cut if tax credits are also cut.
mrs halls 13 May 10, 19:10	tax allowance yes the income for lower paid will go up with the tax allowance but then taken away in loss of certain benefits because it will be counted as extra income , leaving them no better off , but as it's for all the higher paid will benefit from the rise. How is this fair?
Nadeem_Walayat 13 May 10, 20:17	Tax allowances and low paid. Hi Benefits such as tax credits are paid on the basis of gross earnings, so it should not result in loss of benefits to the low paid. The higher paid will be hit hard by tax rises that far outweigh the benefits from the tax allowance change as the government will raise approx £35 billion from tax rises. Once the new government has revealed more data I will try and estimate what the net overall tax picture will mean.
mrs halls 15 May 10, 19:57	benefits after tax allowance starts Hi Thanks for your reply , Housing benefit and Council tax benefit are worked out on your income not gross amount , so unless the goverment put up the amount needed to live on, the low paid will not be any better off.
aden 09 Sep 10, 10:53	£10,000 tax allowance Why do they make the promise that it will happen in X years and not be honest enough to give a date, Promises can be broken and carrots can go rotten before you eat them. Many of my colleagues voted either LibDem or Tory, Now that their employment and lifestyles are under threat they now regret not voting Labour. If most people are honest they would say the same, Me thinks.
Nadeem_Walayat 09 Sep 10, 17:22	Labour Labour would have bankrupted Britian, where even a £100k tax free allowance would be worthless.

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