David Cameron couldíve betrayed his intent to raise the 40p tax threshold, as he publicly admitted he would ìloveî to increase the level upon which higher-income earner pay tax.
The Prime Ministerís comments will be welcomed by middle-income earners, who will have been given solid hope that next year’s election manifesto will entail a tax cut for the projected 2 million professionals who could find themselves fiscally dragged into paying the higher tax rate over another term of Coalition government.
Cameron has faced calls from Conservative MPs to ease the financial pressure which has been applied to professions such as teachers and senior nurses. It appears the Prime Minister is on the same page as his party, as his comments indicate that those who do not consider themselves affluent ought not to be subjected to the higher, 40p tax rate.
Although the yearly income required to qualify for the 40p tax rate is set to increase to £42,285 from £41,865 in April 2015, critics believe this is not a substantial enough alteration to allow for the majority of middle-income professionals to save as much as possible.
Speaking at an event at a water company, Cameron attempted to empathise with a large crowd of workers, prioritising easing the financial burden on the lowest earners: “I know that a lot of people believe that the 40p rate now kicks in quite early and quite a lot of people who don’t see themselves as fundamentally very wealthy are paying that 40p tax rate. Now I would love to be able to stand here and say we are going to sort all this out, we will raise the thresholds of all these tax rates. I can’t make that promise today.”
“I understand the problem with the 40p rate kicking in when people are not earning a lot of money, and I have to look very carefully at the books before I can make any promises about it.”
Cameron revealed the Coalitionís decision to incrementally raise the tax paid by the lowest earning professionals to £10,000 and then 10,500 by April next year. The changes already made have allowed 300,000 workers on the minimum wage to be exempt from paying income tax
Tories not staying true to traditions
In recent times, there has been growing feeling that the once tax-slashing Tory party are no longer in the business of tax reduction. Recent surveys have mirrored this sentiment, with a poll conducted this week showing a majority of people believe Tories are more likely to levy ìhigher taxes for people like youî i.e. the average professional.
This viewpoint is also taken by traditionalist Tories within the party, who urge the Prime Minister to sign off on tax relief measures for middle-income professionals.
When the Coalition came into power, roughly 3m people paid the top bracket of tax, which stood at a greater sum than at present – £43,875. However, the Institute for Fiscal Studies say, according to current fiscal patterns, the number could rise to £5.3m by 205-16, with one in three workers being forced to pay the higher rate by 2023. As shocking as these statistics are, government have time on their side and the need to go back to old Tory ideals of cutting taxes could prove to be the most prudent route to go down.
However, Osborne is seemingly immovable on the issue, as he committed in his Budget to increase the income threshold for 40p tax bracket by a mere 1% annually for the next 2 year. General consensus within the Conservative party is the figure which makes professionals liable for the 40p tax bracket should stand at £44,000, but government targets are far lower than that.
Jonathan Isaby, chief executive of the TaxPayersí Alliance, advised Osborne to take action in the autumn statement.
He said: ìSo-called ëfiscal dragí is fundamentally unfair, as well as economically damagingÖFor years, thousands of hard-working taxpayers have been stealthily dragged into paying the punishing higher rate.î
Labour concur that Cameronís ideas are credible, but accuse the Conservatives of pussyfooting around when action is needed. Implying Cameronís recent remarks are vote-grabbing, sleazy measures, Labour seem adamant Cameron will disappoint people in the matter of tax cuts for the low and middle income professionals, whilst kowtowing to the Richís demands.
“Under this government, people on middle and low incomes are paying more because of changes like the VAT rise, while millionaires have been given a tax cut,” said Chris Leslie, a shadow treasury minister.