UK Government Considers Dale Vince Tax Allowance Proposal

Prime Minister Andy Burnham and Chancellor John Healey are reviewing a proposal from Ecotricity owner and Labour donor Dale Vince to increase the personal income tax allowance from £12,570 to £15,570. The measure, which would mark the first increase in the threshold since 2021, aims to provide approximately £600 in annual savings for the lowest 20% of earners and prevent state pensioners from being dragged into income tax as pensions rise.

To fund the estimated £20 billion cost, Vince proposes eliminating the interest the Bank of England pays to commercial banks on their reserves—estimated between £30 billion and £40 billion annually—and aligning capital gains tax (CGT) rates with income tax rates at 40% and 45%. Vince argues the current system is "backwards" because it taxes wealth more lightly than work.

Critics have challenged the plan's viability. Conservative leader Kemi Badenoch stated that increasing CGT would be "bad for jobs, it's bad for growth," while former Treasury minister Sir David Gauke warned the move could harm banking competitiveness and lending to small businesses. Additionally, HM Revenue & Customs models suggest that hiking CGT could actually reduce annual collections by £3.6 billion by 2029 as asset sales decline.

HM Treasury has declined to comment on the speculation, stating that tax decisions are reserved for official fiscal events. The proposal comes as the government prepares for the October 28 Budget and faces fiscal pressure, with August public sector borrowing exceeding forecasts.