Commenting on the Prime Minister's pledge to raise the tax free allowance from £10,500 to £12,500, Research Director of the Adam Smith Institute, Sam Bowman, said:
It’s great news that the Prime Minister has pledged to raise the tax-free personal allowance to £12,500. Tax cuts for the poor are one of the best ways to help beat poverty in Britain.
Taking minimum wage workers out of tax is a way of giving workers a ‘Living Wage’ without risking jobs. The difference between the Living Wage and the minimum wage is entirely tax – if we stopped taxing minimum wage workers, they would earn the equivalent to a post-tax Living Wage.
This has been a key policy advocated by the Adam Smith Institute for over a decade, and will allow the working poor to keep more of their earnings. And with just a few more steps, we can guarantee a basic standard of living for all workers that boosts the economy too.
National Insurance contributions are just another form of income tax and are not affected by this threshold rise. Raising that threshold and pegging the new NI and income tax thresholds to the minimum wage rate should be the next government’s top priority to beat the scourge of low pay once and for all.
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The Adam Smith Institute is an independent libertarian think tank based in London. It advocates classically liberal public policies to create a richer, freer world.