CIOT: Low income campaigners welcome increase in personal allowance
The Low Incomes Tax Reform Group has welcomed the £1,000 increase in the basic income tax personal allowance as from April 2011. This is a worthwhile simplification of the tax/benefits system which will reduce the numbers both paying tax and claiming benefits.
However, LITRG has warned that any who are still in receipt of means-tested benefits will not see the full benefit of the change.
LITRG’s Technical Director, Robin Williamson, explained that:
“The reason is that entitlement to means-tested benefits is based on after-tax income. Therefore, reducing a claimant’s tax bill will also decrease their benefits entitlement, affecting their overall cash position. For some benefits claimants, such as housing benefit or council tax benefit, the £200 saving (£1,000 at 20% basic rate tax) can be reduced down to less than a £1 a week. And of course, for the very poorest who pay no tax, an increase in personal allowances produces no benefit at all.”
The Chancellor has signalled his intention of increasing the personal allowance further until it reaches £10,000. At that level of income the problems of reduced tax bills leading to lower benefit entitlement should be greatly reduced.
Notes to editors
1. The Low Incomes Tax Reform Group (LITRG) is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.
2. The CIOT is a charity and the leading professional body in the United Kingdom concerned solely with taxation. The CIOT’s primary purpose is to promote education and study of the administration and practice of taxation. One of the key aims is to achieve a better, more efficient, tax system for all affected by it – taxpayers, advisers and the authorities.
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George Crozier
External Relations Manager
D: +44 (0)20 7340 0569
M: +44 (0)7740 477374
The Chartered Institute of Taxation
Registered charity number 1037771
www.tax.org.uk
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