§ Mrs. Chalker
asked the Secretary of State for Social Services how many families faced an effective marginal rate of tax of over 75 per cent. at the latest date for which figures are available.
§ Mr. Deakins
It is estimated that at December 1974, the latest date for which information is available, there were about 60,000 families with children in Great Britain theoretically subject to a marginal tax rate of more than 75 per cent. assuming a £1 pay rise.
- 1. The estimate is based on 1974 Family Expenditure Survey data and is subject to considerable sampling error.
- 2. The estimate includes couples and single persons, with children, where the family head is in full-time work and under pension age, either as an employee or self-employed. There are about 6.5 million such families.
- 3. The estimate is based on the assumption that tax and benefits change immediately the pay rise is given. This is unlikely to happen in practice, mainly because benefits such as family income supplement, free school meals and free welfare milk are awarded for periods of up to 52 weeks, irrespective of changes in income. Upward changes in tax allowances and in the income limits for benefits which occur within the award period greatly reduce the likelinood of actually facing such a high marginal tax rate.