Armed forces to be income tax exempt

Soldiers serving in Iraq and Afghanistan will be exempt from paying income tax under new plans set to be unveiled by the government.

The move comes as part of a larger salary review programme for the armed forces ordered by the prime minister.

The Times reported on Tuesday that there are two options under consideration, with either soldiers based in fighting zones being exempted from income tax, or an across-the-board pay rise for lower ranks amounting to a removal of income tax.

All members of the lower ranks would benefit from this second option irrespective of where they were serving, with the cost expected to run into hundreds of millions of pounds.

Plans to stop taxing soldiers hit the headlines on Monday when Conservative leader David Cameron suggested he would back the move.

But keen to show they were not following Cameron's example, it was also revealed that discussions have been underway in government for some time.

Downing Street, the Treasury and the Ministry of Defence have apparently been working on a review of the support package available to the armed forces over the last four weeks.

American soldiers already benefit from an income tax exemption scheme and Colonel Time Collins, the former British army commander who served in Iraq, said the UK should follow the US example.

"The fact it doesn't happen in this country is a terrible reflection of how the armed forces are regarded as the bottom of the pile," he said.

Writing in the Sun on Monday, Cameron questioned whether enough was being done to help soldiers and their families.

He said it wasn't fair that troops pay income tax while on operations, "so when we put together our forces manifesto, we're going to look at ways to sort these problems out."