Liberal Democrat leader Ed Davey has unveiled plans to implement significant income tax cuts, promising a £17 billion reduction in taxes for households and taxpayers if the party wins the next general election. The proposal includes increasing the personal tax-free allowance to £15,000, a move expected to exempt 2.5 million people from paying income tax entirely.
In addition to raising the personal allowance, the party would increase the threshold for the 40p higher-rate tax band by approximately £6,000, from the current level up to £56,000. This adjustment is set to remove around 750,000 individuals from paying this higher rate. Furthermore, the Liberal Democrats have committed to raising the threshold for the 45p additional rate from £125,140 to £130,000, benefiting approximately 1.23 million taxpayers.
The party criticises both the Conservative and Labour governments for incremental tax increases, describing these as stealthy hikes and such that they have effectively raised income tax rates by the equivalent of 3p. They argue that cutting income tax is essential to address the ongoing cost-of-living crisis.
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Ed Davey emphasised the party’s previous track record, noting their past policies have lifted 3.4 million people out of income tax and yielded hundreds of pounds in tax relief per individual. He pledged that this new plan would provide most people with a tax cut averaging £680 annually by raising both the income tax personal allowance and the National Insurance threshold.
The Liberal Democrats also highlighted their intention to ensure that ordinary workers, including nurses and teachers, are not taxed at rates traditionally applied to high earners in finance and other sectors. Unlike some proposals from other parties, such as the Reform Party’s suggested tax cuts funded by reductions in support for disabled individuals, the Liberal Democrats intend to finance these tax reductions through economic growth spurred by removing Brexit-related trade barriers.