Doubling down: Why increasing the personal tax allowance yet again is still poor value for money

Budget week: Why increasing the personal tax allowance (again) would be poor value for money (still)

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Increasing the personal tax allowance to £11,000 – just £400 on top of an already-planned increase in April – would cost £2.1 billion.

There is now a fair bit of well-informed budget speculation in the air. One of the more likely measures is a further increase in the personal tax allowance (PTA). Both Coalition parties are committed to increasing the PTA in the next parliament, and cutting taxes before an election is always a popular move among politicians. So a mooted further rise in the PTA from the currently planned hike to £10,600 in April to £11,000 seems like an eminently plausible feature of this week's budget announcement.

Using the IPPR tax-benefit model, we estimate that this would cost £2.1 billion a year. Assuming that the chancellor also proceeds with increasing the higher-rate tax threshold by 1 per cent as planned, the distributional impact across families (rather than individual taxpayers) looks like this:

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