The allowance hasn’t changed for several years
The code on most people’s payslips hasn’t changed for years (Image: AndreyPopov via Getty Images)
Green tycoon proposes £3,000 personal allowance boost – need to know
- Green energy tycoon Dale Vince has called for the Government to increase the personal allowance by £3,000 by stopping the Bank of England from paying interest to banks on their reserves.
- The Ecotricity owner claims this radical move could generate a 1.2% boost to GDP and provide £600 extra income for Britain’s lowest earners. Speaking on BBC Radio 4’s Today programme, Mr Vince argued the policy could raise £30 billion annually to fund lifting the personal allowance from its frozen level of £12,570 to £15,570.
- The green entrepreneur, who has donated millions to Labour, said: “We’ve taken £600 from millions of people and we’ve actually impaired the economy.” He argued that restoring the income tax allowance could double GDP growth in the first year.
- Mr Vince’s proposal involves ending the Bank of England’s practice of paying commercial banks 4% interest on their reserves. He claimed this currently costs taxpayers £30 billion annually whilst banks pay savers virtually nothing on deposits.
- However, former Conservative Treasury minister Sir David Gauke expressed serious doubts about the plan’s viability. Sir David warned: “Anything that sounds too good to be true is almost certainly too good to be true.”
- The personal allowance has been frozen since 2022, creating “fiscal drag” as workers are pushed into higher tax bands despite inflation. Chancellor Rachel Reeves confirmed the freeze will remain until 2031, generating an estimated £66.6 billion in additional revenue.
- Labour is reportedly considering Mr Vince’s recommendations, which also include aligning capital gains tax with income tax rates in his pre-Budget Treasury submission.