The Conservatives have come under fire from tax experts, Labour and financial advisers for not laying out how they plan to pay for a promised £7bn in income tax cuts by 2020.
Speaking at the Conservative conference in Birmingham last week, Prime Minister David Cameron fired the starting pistol on the general election campaign with a promise of tax cuts for 30 million workers.
He pledged to raise the income tax personal allowance to £12,500 in the next parliament. It currently stands at £10,000 and will rise to £10,500 next April.
Cameron also promised that a Conservative government would raise the threshold of the 40p tax band from £41,900 to £50,000 by 2020.
Chancellor George Osborne told conference delegates that he needs to make £25bn of cuts in the first two years of the next parliament to eliminate the deficit by 2018.
Cameron’s tax plans immediately came under fire from Labour and tax experts as he set out no plans to finance them.
Shadow chief secretary to the Treasury Chris Leslie says: “Before the last election David Cameron said you can’t promise tax cuts ‘unless you can show how it is paid for, the public aren’t stupid.’
“He’s clearly now taking the British people for fools.”
Association of Chartered Certified Accountants head of taxation Chas Roy Chaudury says: “This [tax reduction] adds billions more to the cuts needed, so it is a tall order to balance the books.
People will have to decide if they prefer tax cuts or more money in public services.”
Advisers welcomed the cuts but highlighted the impact of other Government policies on middle earners.
Informed Choice managing director Martin Bamford says: “The proposed rises to the personal allowance and higher-rate tax threshold are welcome moves for middle earners but do little to offset the punitive tax charges on child benefits introduced by this coalition Government.”
Hargreaves Lansdown head of corporate research Laith Khalaf says: “Someone earning £40,000 could have earnings growth to more than £50,000 by 2020 so they are in the same situation but they will obviously be in a better position under the Tories. It is a change in direction that will be welcomed by taxpayers.”