Boris Johnson should leave the higher-rate tax threshold alone, says AAT

Phil Hall

The proposed lift in the rate at which workers will pay 40 per cent income tax from £50,000 to £80,000 would come at a cost of around £9 billion to the Treasury.

AAT said that while it accepts that there was considerable erosion of the personal allowance in the first decade of this century, increases since 2010 means the personal allowance has now risen considerably and that tax thresholds are about right as they are.
 
Phil Hall, AAT head of public policy and public affairs said: “As AAT made clear in its response to the 2018 Budget, after a period of fiscal drag, the tax thresholds are now about right. Any further increases in the higher rate tax threshold should be limited to annual increases in line with the Consumer Price Index (CPI) and no more.

“It’s also worth noting that the proposals being put forward by Boris Johnson are very expensive and benefit only the highest 5 per cent of income earners - who are mostly men in London and the South East.”
 
Boris Johnson has also suggested that his various spending commitments come from the newly created “fiscal headroom” (the difference between the current UK budget deficit and spending) which currently stands at 1.2 per cent of GDP, around £26.6 billion.

However, the AAT said spending commitments made so far already exceed any fiscal headroom. So, where else could funding be found if borrowing or taxes are not to increase?
 
Phil Hall added: “Last year AAT identified £27bn of annual savings that could be made by making changes to pensions tax relief, increasing the age at which certain benefits are paid and utilising technology in place or fuel duty, road tax and VAT on fuel, amongst various other measures. Boris, and whoever he decides to install as Chancellor, should consider some of the proposals included if they are serious about investing more without damaging the economy.”