Eastbourne MP Stephen Lloyd has described this week’s budget as ‘simpler and fairer’ but George Osbourne’s announcement about a ‘granny tax’ has drawn criticism.
The change in age-related personal allowances – the amount of tax-free income – will save the government £1bn by 2015, but it has been labelled as one of the most controversial measures unveiled in Wednesday’s budget.
It will mean that millions of people will not be as protected from tax as they expected to be.
People under 65 currently have £8,105 of income tax-free from this April. This will change to the first £9,205 in the 2013-14 financial year.
Those aged between 65 and 74 will get £10,500 tax-free from April and people over 75 will have a tax-free allowance of £10,660 from April.
However, this extra allowance is gradually withdrawn from pensioners with a taxable income of between £24,000 and about £29,000, but pensioners who earn more than this do not get the extra benefit.
Anyone with an income of more than £100,000 has all their personal allowance gradually withdrawn, regardless of age.
Her Majesty’s Revenue & Customs figures, which take inflation into account, show 4.41 million people will be worse off by an average of £83 a year in 2013 to 2014.
People due to turn 65 after April 5 2013 will miss out on an average of £285.
Stephen Lloyd MP said the Liberal Democrats had been lobbying the Treasury ‘ferociously’ for the last few months to ensure that tax cuts favoured hard pressed, low and middle income families.
He said, “The Chancellor’s announcement in the chamber was a good result from Nick Clegg’s efforts.
“Our manifesto pledge, to take millions of people out of paying tax altogether, and many more to reduce their tax take up to an income of £10,000 per annum which we have been delivering since the Coalition formed, was speeded up considerably today.
“The Chancellor announced the personal allowance for 2012-13 will be increased by £1,100 to £9,205.
“We are now in touching distance of reaching the £10,000 figure in 2014, a full year before the end of this Parliament.
“In Eastbourne and Willingdon alone, 32,600 people will receive a tax cut next year, with 3,870 being taken out of tax altogether.”
He added, “In addition to the substantial increase in stamp duty for millionaires’ homes, the Coalition has also introduced a new 15 per cent rate of duty to be applied to residential properties purchased by companies.
“In every way this is about making sure the very wealthy pay their fair share.
“The reduction in the top rate of tax from 50 per cent to 45 per cent may not look as if this is the case, but in fact five times more money will be raised from the rich by other tax and anti-avoidance measures being brought in.
“If this wasn’t the case we simply would not have agreed to the change.
“We need to be more effective when targeting the very rich, to ensure they pay their fair share, to ensure as much money as possible is raised by the treasury to fund our vital public services.”
Mr Lloyd also said he was pleased the Chancellor has agreed to provide £56 million of support for the Bexhill to Hastings link road.
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