Budget 2012

Tax-free £10,000 earnings likely 'within two years'

 

People earning under £10,000 a year are set to be excluded from paying income tax within two years after the Government moved to speed up its reform of the system.

From April 2013 no-one with an income of less than £9,205 a year will pay tax, which, George Osborne claimed, would result in the lowest-paid being £170 a year better off.

It is now likely that a £10,000-a-year tax-free threshold will be announced in next year's Budget – ensuring that the Liberal Democrats meet their key election pledge.

The measure had been a demand of Nick Clegg and his party in the Budget negotiations in return for agreeing to cut the basic rate of tax from 50p to 45p.

Announcing the move as a highlight of the Budget, Mr Osborne said: "Every working person on low or middle incomes will benefit.

"Because higher-rate earners will also benefit, 24 million people earning less than £100,000 a year will gain from this measure. We are in touching distance of the goal of £10,000 personal allowance that we all share."

But Liberal Democrat strategists fear that the policy is already being hijacked by the Conservatives.

In his Budget speech, Mr Osborne even used the phrase "going further and faster" to announce the increase – a key slogan of Mr Clegg and the Liberal Democrats' Treasury chief secretary Danny Alexander in the run up to the Budget statement.

They are concerned that voters still fail to associate the party with the policy which they regard as central to portraying the Liberal Democrats as the progressive side in the Coalition at the next election. Trying to counter that impression, Mr Clegg said Liberal Democrats should take credit for the central direction of the Budget.

"(We should be) proud of the fact that we're halving the tax bill for people working on the minimum wage and proud, very proud, that we are taking over two million people on low pay out of paying any income tax altogether," he said.

But critics point out that the policy could conversely end up helping the wealthier taxpayers as much – if not more than the poor. Two-earner couples, who tend to have higher family incomes, will benefit twice over from the increase in the personal allowance because both members of the couple would see their income tax liabilities fall.

As the respected think tank the Institute for Fiscal Studies has put it: "It will strengthen work incentives, especially for low earners. But it is important not to claim too much for a policy which, especially in the current fiscal climate, is expensive."

Rachel Reeves, shadow secretary to the Treasury, said the rise in tax personal allowance was not enough.

"Ed Balls said ahead of the Budget the best way of getting money in the pockets of ordinary people was a cut in VAT, but we said we would support an increase in personal allowance. But numbers from the Institute of Fiscal Studies shows that from next month the average family is going to be £530 worse off each year, and these changes only help by about £170."

Suggested Topics
News
Ian Thorpe had Rio 2016 in his sights
people
Sport
world cup 2014LIVE BLOG: Hosts Brazil take on the Netherlands in third-place play-off
News
Tommy Ramone performing at The Old Waldorf Nightclub in 1978 in San Francisco, California.
peopleDrummer Tommy was last surviving member of seminal band
Life and Style
Swimsuit, £245, by Agent Provocateur
fashion

Diving in at the deep end is no excuse for shirking the style stakes

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Life and Style
Several male celebrities have confessed to being on a diet, including, from left to right, Hugh Grant, Benedict Cumberbatch and Ryan Reynolds
life...and the weight loss industry is rubbing its hands in glee
Voices
Spectators photograph the Tour de France riders as they make their way through the Yorkshire countryside
voicesHoward Jacobson: Line the streets for a cycling race? You might just as well watch a swarm of wasps
Life and Style
lifeHere's one answer to an inquisitive Reddit user's question
Arts and Entertainment
'Eminem's recovery from substance abuse has made him a more potent performer, with physical charisma and energy he never had before'
arts + entsReview: Wembley Stadium ***
Sport
Joe Root and James Anderson celebrate their record-beaking partnership
cricketEngland's last-wicket stand against India rewrites the history books
News
peopleDave Legeno, the actor who played werewolf Fenrir Greyback in the Harry Potter films, has died
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Information Security Manager (ISO 27001, Accreditation, ITIL)

£70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...

C# Developer (HTML5, JavaScript, ASP.NET, Mathematics, Entity)

£30000 - £45000 per annum + Benefits + Bonus: Harrington Starr: C# Developer (...

C# Integration Developer (.NET, Tibco EMS, SQL 2008/2012, XML)

£60000 - £80000 per annum + Benefits + Bonus: Harrington Starr: C# Integration...

Biztalk - outstanding opportunity

£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice