Commenting on Nick Clegg's speech today, Alex Henderson, tax partner at PwC, said:
"A £100 increase in the personal allowance is estimated by HMRC to cost at least £0.5bn. To raise the tax threshold "further and faster" beyond existing plans would cost £11bn. If this is not paid for out of improved tax receipts from growth or from borrowing, there would need to be significant cuts in reliefs or tax rises else where. To illustrate the scale of the measure, a further increase in VAT to 22% would just about meet this gap.
"If new taxes are introduced then the costs of doing so and the impact on those affected needs to be weighed against the benefits. People may also be concerned that the 'net' for the tax is widened over time. Income tax itself was originally intended as a temporary measure to pay for the Napoleonic wars.”
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