INCOME TAX

WORKERS will not pay any tax on the first £10,000 of earnings from next year after George Osborne announced he would raise the tax threshold 12 months earlier than planned.

The LibDems' cherished policy became a reality, but was met with a lukewarm response from unions and charities.

Treasury figures claim that bringing forward the increase in the income tax personal allowance will mean a cumulative cash benefit of £705 for typical basic rate taxpayers since the Coalition took power.

It will also mean 2.7 million working adults have been taken out of income tax altogether in the new financial year.

Mr Osborne said: "When we came to office, the personal income tax allowance stood at under £6500. In two weeks time, the allowance will reach £9440 with the single largest cash increase in its history.

"From 2014, there will be no income tax at all on the first £10,000 of your salary. That's £700 less in tax for working families than when this Government came to office.

"Almost three million more of the lowest paid will pay no income tax at all. It's a historic achievement for this Government and for hard-working families across the country."

Scottish Retail Consortium director Fiona Moriarty gave a cautious welcome to the move, saying: "Accelerating progress towards the target £10,000 personal allowance is what we suggested as a way of easing the pressure on household budgets, giving customers the means to spend and increasing confidence in the wider economy."

But Gillian Guy, chief executive at charity Citizens Advice, said: "The Government has said it is raising the tax threshold to £10,000 to put more money in the pockets of the lowest paid.

"But for a typical family with two children and one parent working full-time on the minimum wage, this will deliver only £17 a year – a measly 32p a week, less than the price of a loaf of bread. In comparison, a couple both earning £30,000 – a total income of £60,000 – will keep £224 a year or £4.30 a week."

Judith Robertson, head of Oxfam Scotland, said: "Raising the tax threshold will do almost nothing for those on the lowest incomes. The 1% cap on working age benefits and other looming welfare cuts are going to hit the incomes of the least well off and could push 200,000 more families below the bread line."

A spokesman for the Scottish Trades Union Congress said: "There was nothing of value in this Budget to address the living standards crisis. Consistently focusing on raising the tax threshold is not a credible way of addressing inequality and falling real incomes.

"This expensive measure ignores the very poorest who don't pay tax and benefits most those in the upper half of the income distribution."