by Simon Bartram
Today we can expect a lot of boasting from Conservatives and Lib Dems about how they have raised the personal allowance, as if that is a faultless defence against any accusation that the poorest are being hit the hardest.
For the 2013/14 tax year, individuals earning less than £100,000 did not pay tax on the first £9,440. This personal allowance is set to rise to £10,000 for 2014/15, saving basic rate tax payers £112 (20% of £560), and Nick Clegg is pushing for the allowance to be raised still further to £10,500 for 2015/16. The extra £500 increase, this is estimated to cost the Treasury £1 billion.
Since personal allowances have rocketed from £6,475 to potentially £10,500, this must surely be one of the most recognisable changes that the coalition has enacted, and it is a one which they ceaselessly flaunt to demonstrate their egalitarian credentials.
Yet this is a very inefficient way of targeting the lowest earners in our society, given that everyone earning up to £100,000 gains from having a personal allowance (above £100,000 your personal allowance decreases gradually to zero), and, of course, households with two earners will prosper more than single occupant households. Some of those households would already be benefiting from the tax breaks for married couples where £1,000 of the personal allowance can be transferred to a spouse.
