Give Everyone £2,500 Instead of a Personal Tax-Free Allowance?
Give Everyone £2,500 Instead of a Personal Tax-Free Allowance?


The New Economics Foundation has put forward a proposal to replace the personal allowance with a weekly income equivalent to £2,500 per year.

The tax-free personal allowance is set to rise to £12,500 from next month as part of tax measures revealed in last Autumns UK Budget, and we are not expecting a change there in today's Spring Statement.

The weekly allowance of around £48 would be given to anyone over 18 years old as long as they are earning less than £125,000 per year. The people receiving the 'basic income' would still be eligible to claim benefits and there would no employment means-test.

The £12,500 personal allowance to be given from next month, if used in it's entirety by a basic rate taxpayer is worth £2,500 - but this is not fully used (or transferred to a partner) by everyone so the benefit to each taxpayer varies.

The ThinkTank proposal would mean that, even though the tax-free allowance would be taken away, due to the provision of the 'basic income', near 90 percent of people would get either a boost or zero impact to overall income.

The removal of the tax-free allowance would lower the point at which the higher rate tax bands kick in and therefore the burden of the cost of the 'basic income' would be raised from higher earners.

Both Caroline Lucas, leader of the Green Part and John McDonnell, Labour Party Shadow Chancellor, have backed the ideas as innovative and a good way to balance the how the tax burden is spread.

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