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IFS attacks chancellor for claiming to free low-paid from tax

Head of Institute for Fiscal Studies says George Osborne 'disingenuous' to claim Budget measures freed 1.3 million from tax.

IFS attacks chancellor for claiming to free low-paid from tax

Think tank the Institute for Fiscal Studies (IFS) has attacked the chancellor over the 'disingenuous' claim he has taken people out of income tax by raising the personal allowance.

In the Budget the chancellor said the personal allowance would increase to £11,000 this April, and to £11,500 from April 2017. It is currently £10,600.

'From April next year, I am raising the tax-free personal allowance to £11,500. That’s a tax cut for 31 million people,' he told MPs.

'It means a typical basic rate taxpayer will be paying over £1,000 less income tax than five years ago. And it means another 1.3 million of the lowest paid taken out of tax altogether,' he added.

However, IFS director Paul Johnson (pictured) said the assertion that 1.3 million of the lowest paid would be taken out of tax altogether was 'disingenuous' because people would still be subject to National Insurance (NI) contributions.

'Something that irritates me is the disingenuousness of the rhetoric on the personal allowance. The chancellor boasted yesterday that this increase means another 1.3 million of the lowest paid workers are taken out of tax altogether, but it doesn't mean that at all,' he said.

'They're taken out of income tax, but they're not taken out of direct taxes on income because it remains the case that NI contributions, the tax only paid by workers, which are just another tax on earnings, they start being paid at about £8,000. So low-paid workers are not taken out of tax by raising the personal allowance.'

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Investment Trust Watch: the hidden gem in UK Income

by Gavin Lumsden on Oct 21, 2016 at 17:18

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