Lib Dems ‘want £12,500 income tax threshold’

The Liberal Democrats have suggested that the income tax threshold should be raised to £12,500 to take all minimum wage workers out of income tax.

The party went into the last election pushing for it to be raised to £10,000. Their manifesto pledge made it into the coalition agreement which commits the Government to raising it to that level by 2015. The income tax threshold for the financial year from April 2011 is £7,475. That will rise to £8,105 from April 2012.

According to the Financial Times, Treasury chief secretary Danny Alexander says that it is the party’s ambition to raise it further to £12,500.

He says: “At a time when the whole country is facing serious financial challenges, the priority needs to be people on low and middle incomes.”

His comments come after 20 economists wrote to the FT yesterday calling for the 50p rate of income tax to be scrapped “at the earliest opportunity”. The Prime Minister’s office also sought to pour cold water on the debate with his spokesman pointing out the coalition agreement’s pledge to raise the income tax threshold, adding that cutting the top rate of tax is described as a “longer term policy objective”.

Communities Secretary Eric Pickles said it is likely the top rate of tax is doing more harm than good for the economy.

He said: “I think there is a strong and reasonable case to say, ‘Come on, this is not actually contributing very much’. On balance, it is probably doing more damage than it is doing good.”