Tax changes spark election battle

The official start of the new tax year has sparked a fresh battle between Labour and the Conservatives over their respective economic plans.

The Tories claim 94% of working households are better off under the tax and benefit changes coming into effect.

Labour claim average families are £1,100 a year worse off since 2010, including Monday's changes.

Both parties say their rivals have secret plans to raise taxes if they win the general election.

The Lib Dems, meanwhile, are angry with the Conservatives for claiming credit for an increase in the personal income tax allowance, which they say they had to force Tory ministers to accept.

The personal allowance - the amount someone can earn before they are taxed - has gone up from £10,000 to £10,600.

It is due to go up to £12,500 by 2020, but senior Lib Dem David Laws said his party "would want to go far faster than the existing trajectory for increasing the personal tax allowance".

In other election news:

• Lib Dem Treasury Spokesman Danny Alexander's claim in the Independent that a Conservative minister - whom he does not name - told a Lib Dem cabinet colleague: "You take care of the workers and we'll take care of the bosses" has been dismissed as "total rubbish" by a Downing Street source
• Lib Dem Scottish Secretary Alistair Carmichael confirmed the memo which claimed SNP leader Nicola Sturgeon would prefer David Cameron to be prime minister was written in the Scotland Office

Shadow chancellor Ed Balls, who is due to unveil Labour's plans later, is to say: "Families are £1,100 a year worse off on average - the true cost of this Tory chancellor...

"These are independent figures from the Institute for Fiscal Studies, which take into account all of the changes introduced by David Cameron's government from May 2010 to today - including the changes to the personal allowance.

"And while millions are paying more, millionaires are paying less. Two years ago today they gave the top 1% of earners in our country a £3bn a year tax cut."

Policy guide: Taxation

This election issue includes income tax and national insurance levies and business taxes.

He will repeat Labour's claim that a Conservative government would be forced to increase VAT to make their sums add up - something denied last month by David Cameron.

The Conservatives claim Labour would be forced to increase National Insurance contributions to pay for their spending plans.

One of the biggest changes coming into force on Monday is the relaxation of pension rules, so that those with a defined contribution pension "pot" can take out as much as they like when they reach the age of 55.

Liberal Democrat Pensions Minister Steve Webb said the principle was to trust people with their own money - but he urged people to seek advice and not rush into any decisions.

Labour's pensions spokesman Gregg McClymont welcomed the "flexibility" in the new system but voiced concerns the pensions industry was "finding it difficult to adapt so quickly to such a big change".

Other changes coming into effect include a higher limit on ISA savings, the Marriage Tax Allowance, a 2.5% increase in the state pension, the abolition of employer National Insurance on under 21-year-olds and the scrapping of the 10p tax band on savings. Working age benefit increases have also been capped at 1%.

The Conservatives have produced Treasury figures suggesting 94% of households will be better off under the changes, with 92% of pensioner households also gaining. The figures do not include workless households.

In a speech, Prime Minister David Cameron will say: "Today is a big day for our country. It's 'money-back Monday' - a day when, quite simply, hardworking taxpayers get to keep more of their own cash."

He will add that as a result of Conservative action - including raising the personal allowance - "our country becomes a better and fairer place to live… where those who put in, get out; where hard work is rewarded; and people are trusted."

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