The Liberal Democrats have announced a £17bn income tax cut package, which includes raising the tax-free personal allowance to £15,000 and adjusting the higher and additional rate thresholds. Party leader Ed Davey said the plan would take 2.5 million people out of paying income tax altogether and give most taxpayers a £680 reduction.
New thresholds for 40p and 45p rates
Under the proposal, the 40p higher rate threshold would rise by about £6,000 to £56,000, while the 45p additional rate would be paid from £130,000 instead of the current £125,140. The party said this would take more than 750,000 people out of paying the 40p rate and benefit around 1.23 million people through the 45p change.
The Liberal Democrats said the measures would be funded through the proceeds of economic growth, specifically from tearing down Brexit trade barriers. The party contrasted its approach with Reform, which it claimed would cut taxes by slashing £22bn of support for disabled people.
Party statement on tax and cost of living
In a statement, the Liberal Democrats said: “The Conservative Party put their taxes up by stealth, and Labour have made it worse – the equivalent of a 3p rise in income tax. There’s no way to end the cost-of-living crisis without cutting income tax. Liberal Democrats have done it before – cutting taxes by hundreds of pounds and taking 3.4 million people out of paying income tax altogether.”
“We'll do it again now, taking 2.5 million people out of paying income tax and giving most people a £680 tax cut, by raising the tax-free personal allowance (and the national insurance threshold) to £15,000,” the statement continued. “We’ll also raise the point at which the higher 40p rate of tax kicks in, taking more than 750,000 people out of paying it. Millions of ordinary people – including nurses and teachers – should not be paying a rate designed for stockbrokers and merchant bankers.”
Election context and impact
The pledge comes ahead of the next general election, with the Liberal Democrats aiming to defeat the Labour government. Davey’s proposal would also increase the personal tax-free threshold to £15,000, a move the party says would directly address the cost-of-living crisis by reducing the tax burden on households.
The plan would take 2.5 million people out of income tax entirely and reduce the tax bill for millions more, according to the party. The Liberal Democrats have previously cut taxes by hundreds of pounds and removed 3.4 million people from income tax altogether, they noted.
