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Income tax personal allowance increase mooted for Budget 2015

Chancellor, George Osborne is planning to announce a pre-election tax boost for thousands of workers by further increasing the income tax personal allowance.

That’s according to a report in the Sunday Times which indicates the Coalition is nearing agreement on a deal that would take the personal allowance “towards £11,000” per year from April 2015.

At present, the income tax personal allowance for most people stands at £10,000 – an increase from £9,440 in 2013-14 – and is set to increase to £10,600 next month.

However, a ‘senior government source’ has indicated Mr Osborne could announce an additional increase of £200 at Budget 2015 on 18 March.

The Sunday Times revealed the final increase figure will be agreed later this week following a meeting of the four senior cabinet ministers, Osborne, Prime Minister David Cameron, Nick Clegg and Danny Alexander.

A further increase to the personal allowance towards the £11,000 mark would cost the Government nearly £2.7bn to implement across the board.

Just over 24 million taxpayers will pay less tax from next month regardless thanks to the already agreed personal allowance increase to £10,600; while an additional 430,000 will no longer pay any income tax at all from 2015-16.

The higher-rate tax threshold, above which income is taxed at 40 per cent, is also set to rise from its current level of £42,285 to £42,385 in 2015-16 as a consequence of the move to raise the tax-free personal allowance.

The same report also suggests Osborne is planning to introduce a new “diverted profits tax” targeting multinational companies thought to have shifted profits abroad to avoid paying tax in the UK.

The tax, which is expected to be a 25 per cent levy, will be more than corporation tax - which is set at 20 per cent – in a bid to encourage businesses to do things properly and pay what they owe to HM Revenue and Customs.

Image: HM Treasury

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