RAISING the income tax threshold to £10,000 beyond existing plans would cost £11bn, PwC has warned.
“A £100 increase in the personal allowance is estimated by HMRC to cost at least £0.5bn. To raise the tax threshold “further and faster” beyond existing plans would cost £11bn,” said Alex Henderson, tax partner at PwC.
Henderson’s comments came in response to a speech made by deputy prime minister Nick Clegg in which he urged the government to go “further and faster” in raising the tax threshold.
The government has promised to raise the income tax threshold to £10,000 by the next election, set for 2015. Clegg argued that the plans should be accelerated “because the pressure on family finances is reaching boiling point.”
According to Henderson unless the measures suggested by Clegg were paid for out of improved tax receipts from growth or from borrowing, there would need to be significant cuts in reliefs or tax rises elsewhere.
“To illustrate the scale of the measure, a further increase in VAT to 22% would just about meet this gap,” he said.
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