47881_Budget_2015_Web_Accessible

Fairness1.205 The government’s long-term economic plan is underpinned by a firm commitment tosupport those who want to work hard and get on, while continuing to support and protectthe most vulnerable in society. The government’s ambition is to build a stronger economyand a fairer society. This Budget builds on the government’s priorities over this Parliament ofhelping families and making work pay by raising the personal allowance and reducing theburden of Income Tax for the lowest paid; supporting and rewarding savers at every stage oftheir life; and taking firm action to tackle tax evasion and avoidance. The government’s welfarereforms continue to promote work and personal responsibility, while putting expenditure on asustainable footing.1.206 As a result of the government’s reforms to tax, welfare and public spending across theParliament, the richest households will make the biggest contribution to reducing the deficit,both in cash terms and as a proportion of their income.Supporting householdsPersonal allowance1.207 The government’s commitment to reduce taxes for low and middle-income earnershas been a centre piece of this Parliament. The Coalition Agreement commitment to raise theIncome Tax personal allowance to £10,000 over the course of this Parliament was achieved ayear early in 2014-15. From April 2015, the personal allowance will be increased to £10,600,from £6,475 in April 2010.1.208 Budget 2015 announces that the personal allowance will be increased to£10,800 in 2016-17 and to £11,000 in 2017-18. The Marriage Allowance will also risein line with the personal allowance.1.209 The successive increases in the personal allowance total £4,525 since 2010, representinga rise of 70% under this government. Taken together, these changes will benefit 27.2 millionindividuals and provide a cash gain of £905 to the typical basic rate taxpayer in 2017-18. By2017-18, the government will have taken 3.7 million working-age individuals out of Income Taxaltogether.1.210 To ensure the full gain of the personal allowance increase is passed on tohigher-rate taxpayers, the higher-rate threshold will rise in line with the personalallowance, taking it to £42,700 in 2016-17 and £43,000 in 2017-18. This is the firstabove-inflation increase in the higher-rate threshold for 7 years. A typical higher-rate taxpayerwill have a cash gain of £848 by 2017-18.1.211 The cumulative impact of these changes has significantly reduced the effective tax ratepaid by individuals. In 2010, an individual earning £20,000 paid £2,705 in Income Tax. By 2017,an individual earning £20,000 will pay £1,800 in Income Tax, equivalent to a 33% reduction inthe tax paid. The effective tax rate for an individual earning £20,000 in 2017-18 will be 9%.1.212 Someone working full time on the National Minimum Wage (NMW) in 2015-16 will earnaround £12,000. In 2010, an individual earning £12,000 paid £1,105 in Income Tax. In 2017-18, an individual earning £12,000 will pay £200 in Income Tax, an 82% reduction in tax paid.The effective tax rate for an individual earning £12,000 in 2017-18 will be 1.7%.54 Budget 2015