‘Historic’ move takes thousands out of income tax

The Coalition was already committed to making the first £10,000 of earnings tax free.

But yesterday George Osborne announced that would be brought forward to next year.

He described the move as a “historic achievement” for the Government and hard-working families.

From next month, the allowance will go up as planned to £9,440 – a £200 boost for 24 million taxpayers, Mr Osborne said.

Liberal Democrat figures suggest the move will mean by next year around 222,000 people in Yorkshire will have been removed from income tax while 1.9m will have had a tax cut.

Matthew Sinclair, chief executive, said: “George Osborne has announced welcome relief for people struggling with the high cost of living.

“Unfortunately, the great limitation of this budget was that it relied far too much on complicated targeted reliefs instead of tax cuts across the board.”

The basic and higher rates of income tax will remain the same and the Government has stuck by its decision to reduce the top rate of tax on earnings over £150,000 from 50p to 45p next month, dubbed the ‘millionaires’ tax break by Labour.

Campaigners warned that for many families the rise in the basic rate threshold would not have a major impact on their spending power.

Gillian Guy, chief executive at national charity Citizens Advice, said: “The Government has said it is raising the tax threshold to £10,000 to put more money in the pockets of the lowest paid.

“But for a typical family with two children and one parent working full-time on the minimum wage, this will deliver only £17 a year – a measly 32p a week, less than the price of a loaf of bread.

“In comparison a couple both earning £30,000 – a total household income of £60,000 – will keep £224 a year or £4.30 a week.”

Gavin Kelly, chief executive at the Resolution Foundation think tank, said: “This is a modest tax cut which gives a little help to most people in work including millions of low-income families.

“However, the bulk of the benefit goes to higher income households at the same time as families on lower incomes face a reduction in support through the tax credit system.”