The Liberal Democrats will outline plans later today for “the most radical tax reform in a generation”.
The party will pledge to scrap income tax for four million low earners – those on less than £10,000 a year – if it wins the next general election.
It says it would fund the measure by introducing an annual 1% tax for those owning homes worth more than £2m.
This is an increase in the property price threshold from the original £1 million whilst the tax rate itself will be increased from 0.5% to 1%.
That would mean a person living in a house worth £2.5m paying an extra £5,000 a year in tax.
The party argues that by raising the threshold at which people start paying income tax to £10,000 this will leave poorer families about £700 a year better off.
But four million top-rate taxpayers will lose out as they will no longer be able to claim tax relief on their pension contributions at the higher rate.
Liberal Democrat leader Nick Clegg has said he wants to make Britain’s tax system “fairer”, cutting the burdens on “struggling families” and closing “loopholes” in capital gains tax and pension tax relief for the better off.
Related posts:
A tax is either fair or not. You can not change the plans to suit ‘marginals in the south east’. Given that you only need 42% to get a majority, why not say anyone with a surname begining A to M has no tax, the rest pay double. Its not fair, but would get enough votes to get you in.
The houses were bought with taxed income, seems unfair to tax retrospectively. What about massive mortgages?
If its votes you are after, tax minorities more too, that would get the BNP’s share of the votes. Who else would the majority not mind paying up? Yes… Politicians, they can have 80% tax too.
Mind you getting rid of thehigher rate tax relief on pensions seems sensible.
Abolishing higher tax releif on pensions woud have to go hand in hand with restrcting the tax that could be paid on the benefits, otherwise where is the incetive of putting into restrivtive savings that offer 20% relief only to be taxed at 40% when they are drawn (30% if one accounts for the 25% tax free ump sum. Tax on pensions is merely deferred.
If we for a minute accept that many 40% payers will only be paying 20% in retirement we might also conlcude that they get a better dea. However, the “better deal” is only relative to their own position as they were paying more tax in the first place. To explain this think of two indivuduals one on 40%, the other on 20% tax. If they have £100 of earnings they can take it now, in which case the former gets £60 and the latter gets £80 to spend after tax If they “divert” it to a pension through the process of tax releif they both end up with £100 in their pension. While there is obviously more incentive for the higher rate tax payer who will only be paying 20% in retirement, they are never in a better postion relative to the basic rate tax payer compared to whom the postion is worse (having it now) or neutral (putting it into a pension)
In comnparrison to the generous relief on “capital” gains and acquistions (higher allowances, 18% tax and many exemptions and planning opportunities) income tax and reliefs are much more punitive all round.