Budget 2014: Chancellor bows to pressure to raise the 40p tax threshold but only by £800

By

Matt West

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The Chancellor bowed to pressure from backbench MPs today by raising the 40p higher rate tax threshold from next year as part of a Budget package that he said was for ‘doers and savers’.

As expected George Osborne raised the personal tax allowance to £10,500 with the increase to come in the weeks before next May’s general election.

But in a surprise move he also raised the higher rate tax band for middle income earners from its current level of £41,450 to £41,865 from next month and then by a further 1 per cent to £42,285 from next April – with the full benefit of the increase passed on to all higher rate taxpayers.

Tax relief: The Chancellor bowed to pressure from his backbench MPs to raise the higher rate tax threshold

The increase was not as high as his backbench MPs wanted however. They had lobbied for an increase in the personal tax allowance to £44,000 amid concerns that the government was doing nothing for those household that make up the so-called ‘squeezed middle’.

The Chancellor faced criticism earlier this week for apparently telling Conservative backbench MP’s on the 1922 committee last month that ordinary voters ‘liked’ paying tax at the 40 per cent threshold because it made them feel like they were a success.

The Chancellor was reported to have said: ‘If they are paying 40p tax they have a greater interest in cutting Government spending because they are paying for it. All the polling evidence suggests I am right.’

Several prominent Conservatives including two former chancellors last week called on Mr Osborne to raise the threshold at which people begin to pay 40 per cent income tax from £41,500 to around £44,000.

They pointed out that when the tax band was introduced in 1988 only one in 20 people were required to pay the tax. Now one is six people pay income tax at 40 per cent. It is estimated up to 6million people could be paying the higher rate tax ahead of the general election next year.

Comments (6)

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Nicholas Clode,

Wells, United Kingdom,

2 hours ago

Wow Osbrne and his pals have just lost the next election. The budget commitee of 6 had more Old Etonians than there are women in Government.

brownmaggie,

AYLESBURY,

4 hours ago

No increase in personal allowance for pensioners, so this is equivalent to a cut in pensioners income.

Terry,

Chichester,

3 hours ago

I’m a pensioner…but I don’t see any reason why us pensioners should get a higher personal tax allowance than is standard for all those younger than us. It has been frozen at £10,500, but the age income allowance goes up each year. When the standard personal allowance goes above £10,500 in April 2016..it will relate to us all..why should we over 65′s be treated more advantageously than others.

chris,

York, United Kingdom,

4 hours ago

Maybe there is an election after April 2015!

abowman123,

Trowbridge, United Kingdom,

4 hours ago

Is it me or was this not in last years budget. thought he announced the higher rate allowance would rise by 1% per annum going forward which is what he has done. This continues to drag more people into the 40% band as wages are starting to rise at more than 1%. Talk about spin!!!

cleverclogs,

London,

4 hours ago

I guess he’s a member of The Magic Circle! – they do a lot with smoke and mirrors don’t they?

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Budget 2014: Chancellor bows to pressure to raise the 40p tax threshold but only by £800