Chancellor Cuts Tax for Basic Rate Payers

Chancellor of the Exchequer Alistair has cut income tax for basic rate tax payers. He has done so by raising the basic rate threshold to £6,025. This is particularly advantageous for ow earners, many of which have been penalised by the 10p tax rate.

The cut is effective for the whole of the 2008/9 income tax year, although most tax payers will have to wait until September before they see any change to their take home pay. It appears that higher rate tax payers will not benefit from the move, as adjustments will be made to the higher rate threshold.

The cost of the move is estimated to be £2.7 billion. The Conservative Party have attacked the move on the basis of the timing. The Government faces a crucial by election on Thursday - just two days after the announcement.

The 10p Tax Problem

Did Gordon Brown blunder when he did away with the 10p bottom rate of income tax? Writing in the Financial Times, economist John Kay explains the maths behind the self-inflicted problem currently tearing apart the Labour party. Kay has worked out the income levels at which people lose and when they gain.

It seems to me, that the biggest mistake Brown made, was not to come clean on the fact that there would be a large number of losers. What seems ludicrous is that the losers are amongst UK society's poorest and most vulnerable people who appear to suffering a rate of inflation much higher than the population at large. Hubris.

Storm clouds gather for Tax of Mass Disaffection

How Gordon Brown must wish there was no such thing as televison. Yesterday's TV news shows ran footage from last year's budget when Brown was still Chancellor of the Exchequer. The clips show Brown commending the budget as a "Tax cutting" budget and making much of the cut in the basic rate of income tax from 22p to 20p in the pound. Interestingly, Brown failed to mention the total withdrawal of the lowest £1,500 band taxed at 10p in the pound. This was only mentioned in the small print of the budget document. The removal of this band has meant that up to 5.3 million people - all of them low paid - will now pay more tax than if the 10p band and the 22p basic rate had remained. This week, those low paid workers will see the full cost of this in their monthly pay packets.

Brown's dishonesty will cost him dear. The tax of mass disaffection is stirring up a rebellion amongst Labour MPs and Councillors. On 1st May, many of the country's voters go to the polls in local government elections. Don't expect the low paid to give Gordon Brown a vote of confidence.