By Rosie Niven | 15 August 2014
A Liberal Democrat government would raise the personal allowance to at least £12,500 by the end of next Parliament, chief secretary to the Treasury Danny Alexander has pledged.
Setting out the party’s manifesto tax plans, Alexander also said the level at which people start paying National Insurance would also rise begin to rise once the £12,500 level has been hit.
Further increasing the tax-free allowance, which has already risen to £10,000 in the current tax year and will be £10,500 in 2014/15, would be worth £400 per year to a typical basic rate taxpayer, the party said.
Alexander also announced that the party’s proposed increase in the threshold would apply to the personal allowance for the around 6 million pensioners who pay income tax, whose threshold has not be increased in this parliament.
He said that lowering the income tax burden on working people was a priority for the party.
‘By April next year we will have delivered a tax cut to over 26 million people worth £800 a year to a typical basic rate taxpayer and taken over three million out of tax altogether.
‘Now we want to go even further and lift the amount of money people can earn before paying income tax to £12,500…When we've reached £12,500 we will seek to raise the level that people start paying employee National Insurance.’
Alexander added that the manifesto commitments would mean ‘nothing less than a generational shift’ to a fairer tax system that rewards work and helps working people.
The proposal to raise the personal allowance was on the front page of the 2010 Liberal Democrat manifesto and is one of the party’s policies that have been implemented by the coalition.
The party has since stated its intention to bring minimum wage workers out paying income tax altogether.
The commitment to increase the threshold at which NI is paid comes after the liberal think-tank CentreForum said this would be a more cost-effective and progressive way of cutting tax.
