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Allowance rise met with doubt

13 May 2008
Categories: News , Income Tax
Experts express reservations about latest Treasury move

The Chancellor's announcement that the personal tax allowance will rise by £600 was greeted with reservations from prominent commentators.

Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants (ACCA), welcomed the move, saying taxpayers 'have been demanding certainty and clarity… and this is a step in the right direction'.

However, he added: 'The downside… is that business' systems and processes will have to be updated halfway through the tax year. SMEs represent over 99% of UK businesses, and they will have to change their PAYE codes and tax systems.

'The ACCA also questions how many taxpayers will now be dragged into the higher rate tax band of 40%. Due to these changes, there will now be people who were on the 20% tax band who will be brought into the higher rate because of this £600 decrease in the 40% tax band.'

Liberal Democrat shadow chancellor Vince Cable was blunt, saying the Government's tax policy had 'descended into a complete farce'.
Dr Cable remarked: 'The abolition of the 10p rate was designed to help Labour win the election that never was. Now this by-election Budget is designed to help them cling on to Crewe in next week's vote.
'The Chancellor is desperately trying to backtrack from the disastrous decisions of the Prime Minister but has still hasn't managed to get it right. This U-turn leaves 1.1 million of the lowest paid workers losing up to £100 each.'

Andrew Jupp, head of tax at Tenon, said Alistair Darling's new tax package 'has to be welcome news, but it's a shame that it has taken so long and so much protesting from those affected for the Chancellor to take this action'.

Grant Thornton's national tax office boss, Francesca Lagerberg, voiced her concern that raising personal allowances was not targeting all those affected by the aboliton of the 10p band.

'There are still some who will spend the 2008/09 tax year worse off,' she said. 'The Chancellor has delivered an essentially unfunded early Christmas present to a large number of UK workers, but failed to undo [a] mistake for around 1.1 million low income households.'

Sections - income tax and NI

Categories: News , Income Tax
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