Thousands of migrant workers face losing their £10,000 tax-free Personal Allowance under new Treasury proposals, as the Government aims to bring the UK’s tax laws in line with other European countries such as Germany and Holland.
According to a Treasury consultation document, the UK’s tax allowance is higher and, combined with restrictions in other countries, means that the tax paid by many non-residents is not proportionate to how much they earn here.
The policy could also save the Exchequer £400m a year. However, there are concerns that it might put some migrants off coming to work in the UK, although the rule would only apply to those wishing to live in the country for less than six months per year. These are likely to be the 250,000 or so migrant workers earning below the level of the allowance in the UK, such as summer fruit pickers.
As the consultation document points out, increasing the Personal Allowance has been a key Government priority since 2010. It has been increased by more than 50 per cent over this Parliament and will go up again, in April next year, to £10,500.
The Treasury suggests that few countries have such a generous allowance and that the UK grants it to more non-residents than many other countries, meaning that the current rules on the Personal Allowance can, in certain cases, mean that there is little correlation between economic activity in the UK and tax liability here.
The consultation document is therefore proposing changes to improve the UK’s link between economic activity and tax liability and is suggesting possibly setting a total income level below which the new restriction would not apply, “as a possible protection for non-residents with very low global incomes”.
Interested parties have until October 9 to respond to the consultation.