§ But for the vast majority of individuals what really matters is income tax. And income tax is far and away the biggest source of Government revenue. This year about 26 million income taxpayers will contribute, in round figures, about £30 billion to the Exchequer.
§ Quite rightly people look for some reduction in their own tax burden. As I have explained at the outset, and demonstrated by my proposals, the paramount aim of this Budget is to help industry, to encourage business, and to create jobs. But I want also to help people directly. The one helps the other. People need industry; but industry also needs people—as workers, as customers, as investors. We remain firmly committed as ever, over the years, to reduce the burden of direct taxation. It is essential to do so to improve incentives, to remove disincentives and to reduce the poverty trap.
§ There are always, of course, competing arguments as to whether one should reduce the rates of income tax or raise the thresholds at which people pay tax. Any Chancellor would like to be able to do both. But this year, given my principal aim, I have had to make a choice.
§ We have already reduced the basic rate of tax from 33 per cent. to 30 per cent. and reduced the higher rates of tax as well. I propose, therefore, to concentrate the relief that is available this year on raising the tax thresholds.
§ The single personal allowance will accordingly be increased by £190 to £1,565 and the married allowance by £300 to £2,445. The additional allowance for single parents will, as a consequence, rise by £110 to £880. So too will the widow's bereavement allowance. And there will be corresponding increases in the age allowances, the higher rate threshold and bands, and the threshold for the investment income surcharge. Effect will be given to changes under PAYE as from the first pay day after 26 April.
§ These increases are up to two percentage points more than the 12 per cent. required to take account of inflation in 1981. They are worth £1.8 billion this year and almost £2½ billion in a full year. As a result some 1.2 million people who would have paid tax next year will not now have to do so. This news will be very welcome both to the House and to the country at large.