Proposals put forward in the February’s budget will simplify the income tax system and should leave some of the lowest paid workers better off, Treasury Minister Eddie Teare has said.
Mr Teare was referring to proposals, which go out to public consultation shortly, to abolish the basic 10 per cent tax rate but raise the individual personal tax allowance from the current £9,500 to £14,000.
‘I’m hoping to move as many people as possible out of the income tax bracket. If finances permit I would like to raise the personal allowance slightly higher to £14,750. At that point no one would be any worse off so that’s the target.’
He added if the personal allowance is set at £14,000 even the worst hit people – those earning around £20,000 – would be about £150 worse off over the course of a year.
The move will mean 10,000 low paid workers will no longer be eligible to pay income tax and it will also reduce the circumstances where income tax acts a disincentive to people taking a low-paid job. Mr Teare said the precise level of personal allowance would be set for 2016-17 in next year’s budget assuming public consultation proves to be favourable.
The extra age-related tax allowance of £1,000 for those over 65 would be retained giving them a personal allowance of £15,000 (or £15,750, depending on the level set).
Raising the personal allowance to £14,750 and abolishing the 10 per cent tax bracket woult cost around £5.1 million, Mr Teare said.
Much of this would be funded from changes in property tax announced in the budget, as well as the 10 per cent tax announced two years ago on large retailers earning profits of over £500,000.
The consultation runs until Friday, October 9.