Nick Clegg pledges to reduce income tax for earners

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Nick Clegg pledges to reduce income tax for earners

Nick Clegg was accused of an ‘ambush’ after a surprise call for a GBP 1 billion tax cut – just as Prime Minister David Cameron left the country for the Commonwealth Summit in Sri Lanka.

The Government has constantly increased the personal allowance – i.e. the total amount an individual can earn before they have to pay income tax – from the 2010 election onwards.

When the coalition came to power, the personal allowance for those of working age (under 65s) was GBP 6,475.

And over the last three tax years, this total has risen, and is now set at GBP 9,440.

Yet the Lib Dem leader stunned his Tory Coalition peers on the 15th of November by revealing his plans for a new tax break.

Booking.com

The threshold is due to rise to GBP 10,000 in April 2014, yet Mr Clegg wants to make it GBP 10,500 from April 2015 – just in time for the next General Election.

Current estimates predict the move may cost the Treasury GBP 1 billion.

Clegg has previously stated that raising the personal allowance to GBP 10,000 – a tax cut he claimed was “worth GBP 700 to millions of people” – was a “huge step” he had been campaigning for for years.

And now, after three years of austerity and Britain’s reviving economy, he has stated the public “deserve to feel the benefits, without delay.”

Mansion tax

Conservatives said any changes need to be “paid for,” but that they would consider the tax change.

Mr Clegg told the BBC’s Andrew Marr programme his favoured method of funding the tax cut would be through a “mansion tax” on the “super wealthy.”

However, he also stated that the Conservatives would not consent to this, and that “we will find other ways” to fund the cut.

“It’s not agreed yet,” he continued, “it’s something I would like to see us deliver as a coalition government in the next budget.”

Workers’ bonus

Clegg also stated he would like to raise the personal allowance threshold by another GBP 500 – something he termed a “workers’ bonus”.

The proposed tax break would apply to 24 million normal rate taxpayers, in addition to removing half a million from paying income tax completely.

With the basic rate of income tax currently set at 20%, an extra GBP 500 on the personal allowance threshold would reduce tax by GBP 100 for everybody earning over GBP 10,500.

(However, people earning above and beyond GBP 100,000 either receive a reduced personal allowance or nothing at all.)

Mr Clegg said, in the long term, the Liberal Democrats’ ambition was to ensure “no one pays any income tax on the equivalent of the minimum wage,” currently set at GBP 12,500.

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