Think-tank brands income tax changes ‘misguided’ and ‘regressive’

HMRC-Tax-Form-700x450.jpg

Chancellor George Osborne’s moves to increase the tax-free personal allowance and raise the higher rate threshold have been condemned by the Resolution Foundation.

Osborne announced the personal allowance would reach £11,500 as part of a pledge to reach £12,500 by the end of the Parliament, while the 40p tax threshold would move from £42,385 to £45,000, with both changes coming into effect from April.

However, the moves have been slammed as “miguided” by the Resolution Foundation, which estimates that the changes will cost £2bn for 2017/18, rising to £2.6bn by 2020/21.

It says: “They are highly regressive, with over 80 per cent of the gains going to the top half of the income distribution and roughly half – 47 per cent – going to the top 20 per cent of households alone.

“Taken together with other policy announcements made by the Government since last year’s election, we estimate that households in the bottom half of the income distribution stand to lose an average of £375 a year by 2020-21, while those in the top half are set to gain by an average of £235.”

The think-tank adds: “Spending an extra £2.5bn on tax cuts that overwhelmingly benefit rich households cannot be justified, especially when lower income households are already set to fall further behind as a result of cuts to Universal Credit.”