Nigel Farage recently announced that he would take all those on the National Minimum Wage out of Income Tax. On the surface that sounds like a bold move. On the surface.
From 1st October this year, the hourly rate for someone on the NMW will be £6.50 per hour. If that someone works 40 hours per week, 52 weeks of the year then that works out at £13,520 per year. Their personal tax allowance will be £10,000 so they only pay Income Tax at 20% on £3,520. The amount paid works out at £704 or £13.54. Certainly not to be sniffed at, but hardly the largesse that one might first think.
However, Value Added Tax is levied at 20% and, if those benefiting from Farage’s tax cut spend all or most of that £13.54 per week then they are receiving with one hand and paying most, if not all back…
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