Increasing personal tax allowance to £20,000 would remove almost £49m from the income tax take, Treasury model shows.
A significant increase in the personal allowance is expected in next week’s Budget, having been all but stated by the Chief and Treasury ministers.
Figures from the Treasury reveal that raising the personal income tax allowance from £15,000 to £20,000 would reduce annual government revenue by almost £49 million.
To put that in context, that is more than the budget for the Department of Home Affairs in last year’s Budget.
The data, presented by Treasury Minister Chris Thomas, models the impact of £250 allowance increments and shows the revenue loss growing from £2.6 million to £48.95 million, while a single worker on £25,000 would save up to £937.50 in tax per year.
The estimates are based on 2023/24 tax records and are subject to revision.
The Minister highlighted previous advice from then minister Dr Alex Allinson, who said last November that “the impact on Income Tax revenue is estimated to be in the region of £2.5 million to £3 million for every £250 the personal allowance is increased by”.
These figures would suggest either the government is going to park the issue until after the election, or public services are facing cuts.