Coalition split over new 10p tax band Ministers are examining the plans being promoted by Tory backbencher Robert Halfon MP to bring in the new tax rate for those on lower incomes. Should the 10p tax band be restored? The scheme, which was debated in Parliament a fortnight ago, would see the first £2,500 of taxable income taxed at 10p in the pound rather than the current rate of 20p. That would put £250 in the pockets of every tax payer in Britain. Proposals sent to the Treasury would reintroduce the 10p rate for income between £10,000 and £12,500, around the level of the national minimum wage. The thinking is that voters notice more when tax rates are lowered, rather than more complex changes to existing thresholds. The 10p tax band was implemented from April 1999, with taxpayers paying only 10p in the pound on their first £1,500 of taxable income, and axed in 2008. Mr Halfon told The Daily Telegraph: "We have to show that tax cutting is a moral creed - tax cuts must focus on the many not the few. We should pay for the 10p tax rate to be redistributed revenues from the 45p tax rate to fund the 10p tax rate. However speaking hours later on a visit to Eastleigh ahead of this month's by-election, David Laws, a Liberal Democrat Cabinet Office minister and senior adviser to Deputy Prime Minister Nick Clegg, dismissed the idea. Asked whether he would support bringing back the 10p band, he said raising the income tax threshold is "far more effective than bringing back the 10p tax rate." He said: "It's much simpler than having a 10p rate.It's far more attractive to say to people on low incomes you won't pay any income tax until you earn a sensible amount of money. We're even talking about raising it further in the next Parliament so people on minimum wage don't pay any tax at all. Axing the 10p tax band was estimated to raised the Exchequer an additional £7.3billion in 2008/9, according to Treasury figures. Those most affected by the abolition of the 10p rate were those aged under 65, with an income under £18,500 who were in childless households. Speaking in a Commons debate last month, Treasury minister David Gauke said there were "pros and cons of" introducing a lower rate. Government sources indicated last night that Mr Laws was closer to Treasury thinking, suggesting that Chancellor George Osborne would refuse to introduce it.