In what he described as ‘the most significant structural change to the UK tax system proposed in recent years’, the Tory leader said no one would pay income tax on their savings or dividends unless they qualified for the top rate of 40% income tax.
The Conservatives said that currently people are taxed twice on savings – once on their income and then again on the interest if they have saved it.
The proposal means that savings income, interest from banks and building societies, authorised unit trusts, gilts, other interest bearing securities including corporate bonds, the income on life insurance annuities, discounts such as the return on discounted securities and dividend income would not be subject to income tax for starting and lower rate taxpayers during 2003/4 if the Tories win the next general election.
Labour social security secretary Alistair Darling, said the Tory figures did not add up. But the Conservative party leader said he had shown where tax cuts should be made and estimated the cost at Pounds 3bn.
He said: ‘Our proposal will get rid of a double tax hit on responsible people who want to put money away for their future.’
Chancellor Gordon Brown ruled out across the board income tax cuts and said his budget would increase children’s tax credit to £10 a week and also raise the existing family tax credit.
He said this would help families in most need, including mothers who wanted to stay at home.
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