Govt urged to raise income tax threshold to £10k

The government should raise the income tax threshold to £10,000 in next month's budget, according to a senior Liberal Democrat.

David Laws, the former chief secretary to the Treasury, has claimed that the move would help alleviate the financial pressures on millions of families across the UK.

The income tax threshold was raised by £1,000 to £7,475 for the fiscal year 2011/12, with this set to rise to £8,105 this year as the coalition looks to eventually reach the £10,000 mark.

However, Mr Laws wants this target to be reached this year and has proposed stripping wealthy savers of the high-rate pension tax relief to fund the move.

"We can make changes that take away some of the subsidies that are going to the top one per cent or five per cent of the income distribution and get them to where they're really needed - those on low and middle incomes," he told BBC's Newsnight show.

Last week, chief secretary to the Treasury Danny Alexander called for tax relief on pensions for wealthy consumers to be halved from 40 per cent to 20 per cent.