Income tax threshold to rise in Budget 2014?


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Deputy Prime Minister Nick Clegg is planning to push for the starting threshold for income tax to rise by £500 to £10,500 in the 2014 Budget, due on Wednesday 19 March.

If he gets his way, workers could be able to earn up to £10,500 tax free by April 2015.

The policy is in line with Clegg's aim of "cutting income tax for ordinary taxpayers" and would help him to get that bit closer to his target of a threshold of £12,500.

According to the Daily Telegraph, he plans to tell business leaders at Mansion House in London tonight: "In the next parliament we would raise the personal allowance so that no one pays any income tax on the first £12,500 they earn.

"It's our flagship policy because it's how we make work pay, and it's our way of making sure the British people know that this recovery is theirs."

Raising the threshold to £10,000 was central to the Liberal Democrats' election manifesto in 2010 and was identified as a Government tax priority in the coalition agreement. And things have changed since the coalition came to power.

The income tax personal allowance, or amount you can earn before having to pay tax, is already due to hit £10,000 in April next year, despite being just £6,475 a few years ago.

Clegg says that the increases already announced are worth about £700 a year to about 20 million workers. An extra £500 of allowance, meanwhile, would cut a typical basic-rate taxpayer's annual bill by £100.

However, there are no guarantees that Clegg's latest demand will be met. George Osborne has endorsed the personal allowance increases up to £10,000, but the Guardian claims that the Conservatives are on record as opposing this type of tax reform.

And while Prime Minister David Cameron said last month that any money the Government had "in the coffers" would be used to target tax reductions for the poorest, he has since repeatedly refused to rule out lowering the rate of tax paid by the richest further from 45% to 40%.

Tax tricks to improve your wealth

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