Income tax

In his conference speech, David Cameron said a Conservative government released from coalition would make two changes to income tax by 2020. He presented the first – a rise in the amount of money people earn before they pay income tax to £12,500 – as a tax cut for minimum wage workers. He presented the second – a rise in the level at which workers start paying the 40p rate of income tax to £50,000 – as a tax cut for the middle class. Neither change is quite what Mr Cameron says it is.

The chart below suggests how much people making various incomes stand to benefit from the changes. (Source: Ben Richards.) Treat it as illustrative: the exact numbers will depend, among other things, on when the cuts are introduced. But it shows how the bulk of the benefits would be skewed towards those in the top quarter of earners.

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On Saturday, Ed Balls announced that a Labour government would bring back the 50 per cent tax rate on incomes over £150,000. His main justification is that it would raise more revenue than government estimates suggest. Is the shadow chancellor correct? Read more >>