2p or not 2p?

Question

Is the 2p cut in basic rate income tax a real tax cut considering that the 10p rate was scrapped?

Answer 1

Mr Finance is part right. Its correct that anyone earning under about £19,000 will be worse off if you look at income tax in isolation. However, these people may get additional benefits such as working tax credits which MAY mean they are better off.

Also Mr Finance's maths isn't very good. Just because the average wage is £22,000 that doesn't mean most people earn £22,000 or more. (For example, 9 people earn £10,000, 1 person earns £100,000. The average of wage for these 10 people is £19,000. But 9 out of 10 are earning less than the average).

Answer 2

I think it works out that if you earn over 19,000 pounds then you gain from the new budget rules. The average wage is around 22,000 so most of the population will gain.

Its funny though, Gordon Brown said that this budget would help the poor. The cut in income tax will only help the people earning over 19,000, hence not the poor!