CAMERON REFUSES TO REDUCE 40 Pence TAX RATE – Despite growing calls from the Tory Right to help reduce taxation for those pushed into the higher tax bracket of 40 pence in the pound, David Cameron has announced that he will not increase the earnings threshold to allow thousands to escape.
This year, Mr. Cameron again enforced the message that he was prepared to help married couples further by extending their tax breaks.
The new tax break for married couples, where £1,000 tax allowance annually will become transferable with one basic-rate, will be announced tomorrow in the Chancellors Autumn Statement and Mr. Cameron said that this move to help married couples was just the start and he would be looking to extend this help further for married couples.
The Chancellor George Osborne is also slated to offer over twenty million basic-rate taxpayer’s further tax breaks but has ignored calls from the Tory Right to help more for middle class families who have been pushed into 40 pence tax bracket.
It is expected that the basic rate of tax will start at £10,500 by the next election; a move that Mr. Osborne is likely to make tomorrow or in the next annual Budget.
If Mr. Osborne does make such a move, it will take 2.7 million people out of having to pay any income tax; the rise is significant from £6,475 to £10,500 giving much relief to poorer working class families.
For those who do benefit from the expected tax bracket increase on the basic rate, they are expected to see an extra £705 a year in their pocket.
Whilst this is good news for those on lower incomes, anyone earning the higher rate tax band or close to it are certainly going to suffer.
It is expected that by 2015 the average number of people paying the higher rate of 40 pence will rise from 4.1 million to 4.9 million.
According to Mr. Cameron the balance is right in that the new tax breaks will help all those but the richest; he further stated that by next April more people will have more money in their pockets and this is a good way to help families with their finances in times of austerity.
There remain concerns for the middle classes who will inevitably get dragged into the 40 pence tax rate, as the starting rate will be set at £41,865; it is expected that one in six workers will be dragged into paying 40 pence on every pound they earn..
Figures from HM Revenue and Customs clearly showed that there were 3 million higher rate tax payers when Mr. Cameron came to power; this figure now stands at 4.1 million and is expected to rise to 4.9 million by 2015.
Some have suggested that Mr. Cameron is attempting to play the role of Robin Hood, but unfortunately this could backfire as it did in France after the French Government announced a tax hike on the countries rich – the result is that wealthy people left, closed businesses and therefore the Government didn’t derive any benefit from the higher rates of taxation but rather hurt the economy with devastating effects.