During their spring conference at the weekend, the Liberal Democrats announced that they want to see the income tax threshold raised to £10,000. They say this move would reduce the average employees’ tax bill by £700 and give pensioners an extra £100.
Such an increase would also mean that 3.6 million people would not need to pay any income tax. This includes umbrella company contractors that ‘dip in’ to the employment market for perhaps the odd one or two short assignments during the tax year.
Introducing such measures would obviously be costly but the party would cover the cost by closing loopholes in the current tax system, making polluters pay and introducing a new mansion tax on homes worth over £2m.
Vince Cable, the Lib Dem shadow chancellor believes that people with the ‘broadest shoulders’ should bear a little more of the burden. He also said that our tax system needs to be rebalanced and the unfairness eliminated.
Economic forecasters however have said that income tax needs to be increased by up to 3p if we want to cut the public deficit by 50% over the next 4 years. Other countries in Europe with massive deficits are taking a much harder line than Britain and our current fiscal consolidation plans are not aggressive enough and lack credibility.
Whatever measures are taken after the general election, umbrella company workers and contractors with their own limited company working inside of IR35 can expect to see an increase in the amount of income tax and national insurance contributions deducted from their pay.
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