One million more people pay higher tax under Coalition.
According to economic experts, an extra one million people will now be forced to pay the 40% upper rate of income tax rate in order to fund the coalition’s plans to help the country’s lowest paid workers.
The Coalition stated that nearly 2 million people have been taken out of the tax system by raising the tax free personal allowance; the 2014 budget raised the threshold again from £10,000 to £10,500 (starting in April 2015). The rise will be financed by the lowering of the 40% tax rate – announced in the same budget.
The Institute for Fiscal Studies calculated the effect of a 1 per cent rise in the 40p threshold (below-inflation), which took it to £42,285 for the next financial year — that is £4,910 lower than it would have been under the plans of the last Labour government.
The IFS found that a further 400,000 people will pay the higher rate from April 2015, resulting in a total of some 1.1m extra workers having been brought into the upper tax bracket since 2010.
The Government faced some opposition from Conservative MPs. Before the budget, John Redwood stated that the Chancellor should do more to help people on middle incomes, not just the poor. “It is affecting not just those at the threshold limit, who find that a pay rise disappears, but people further down the income scale with aspirations. We need lower taxes across the board,” he said.
Centre-right think-tank “Policy Exchange” also called for tax cuts before the Budget, and for a rise in the threshold for paying NI to £10,000 a year. The organisation stated that such a move would be more effective than raising thresholds of income tax. They believe it would: “subsidise low pay, rather than addressing the cause of low pay following the financial crisis”.
