New tax cut will give workers another £100

WORKERS will be granted a tax cut in their pay packets, as the Chancellor announced the personal tax allowance would be increased to £10,500 next year – adding around £100 a year to the income of the typical earner.

Self-employed Tracy Eydmann works part-time in sales. Picture: Jane Barlow

The figure, which represents the amount employees can enjoy tax-free before the basic tax rate kicks in, is already due to increase this April to £10,000.

“In this Budget, we make sure hard-working people keep more of what they earn and more that they save,” George Osborne told the House of Commons, adding that the average worker would have benefited by £800 less income tax since his government came to power in 2010. “I am incredibly proud of what we have achieved.”

The UK government has been raising the allowance since it came to power four years ago, when the limit was £6,475.

Mr Osborne said the move would mean three million more of the lowest-paid people in the country would now be exempt from paying any tax altogether.

Higher-rate taxpayers will also have a reprieve, as the level at which the upper rate kicks in will rise below inflation next month to £41,865, and then to £42,285 in 2015-16.

“After highlighting the strength of the UK economy and pointing out various growth forecasts that almost beggar belief, the Budget went on to help ‘the makers, doers and savers’ of this country,” said William Nicholls, dealer at Capital Spreads.

However, while the move was met with approval by some, others claimed it would make little difference to the fortunes of families who have been hit by rises in energy bills and the cost of food and frozen wages.

Len McCluskey, general-secretary of union Unite, said: “Ordinary people will be asking themselves, are they better off? The simple answer is no. This was a blue-rinse Budget for the stockbroker belt, who will celebrate their tax reductions and help with their savings. But for real Britain, this is devoid of effort to tackle the crisis in living standards facing ordinary people.”

He added: “The £56 a year that basic-rate taxpayers will get through changes to tax allowances is a pittance. It will do nothing to help low-paid workers in the grip of a wage siege, nor will it help the 4.6 million people whose pay is so low they don’t pay tax.”

Matthew Reed, chief executive of the Children’s Society, said any money saved would be erased for many on the lowest incomes, as the welfare budget was capped at £119 billion for next year.

“Raising the personal allowance and lifting three million people out of taxation may appear a positive move,” he said. “But for families that depend on housing benefit to top up their meagre earnings, this will gain them very little.”

The tax changes came in addition to a new scheme, announced earlier this week, for parents of under-12s, who will be entitled to a tax break on childcare worth up to £2,000 per child.