Liberal Democrats in government lift the poorest workers out of Income Tax altogether

The government are implementing a key Liberal Democrat manifesto pledge and changing the tax system to make it fairer, by lifting the poorest workers out of Income Tax altogether and cutting taxes for most people.

This April 880,000 workers will stop paying Income Tax when the lower threshold is raised from £6,475 to 7,475.

The Institute for Fiscal Studies says the tax changes will mean the richest tenth will lose around 3% more of their income and that the main winners from the 2011 tax changes will be lone parents who are not working, and low-to-middle income households.

The IFS report concluded that:

·         The main winners from the 2011 tax changes will be lone parents who are not working, and low-to-middle income households

·         For example a family with two children and one person earning £20k will be £530 better off

·         Those earning up to about £42.5k a year (including tax credit) will also be better off owing to the changes being introduced in April

·         The biggest losers are the very richest households owing to restrictions on the amount that can be contributed to a private pension. They have also been affected by the 50% income tax rate on earnings above £150,000 and withdrawal of the income tax personal allowance above £100,000

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