§ Mr. Lawson
asked the Chancellor of the Exchequer what and when was the highest marginal rate of income tax, including national insurance contributions from employees, on average incomes; and what will be the marginal rate of income tax, including national insurance contributions from employees, in 1978–79 assuming that there is no change in the standard income tax rate of 34 per cent.
§ Mr. Robert Sheldon
, pursuant to his reply [Official Report, 12th December 1977; Vol. 941, c. 71], gave the following information:551W
The highest marginal rate on average earnings was 45 per cent. in the years 1942–43 to 1945–46, there being no national insurance contributions in those years.
Assuming a basic rate of 34 per cent. and an employee not contracted out of the State pension scheme, the marginal rate on average earnings in 1978–79 will be 40.5 per cent.
The standard rate of income tax in 1942–43 to 1945–46 was 10s., but this was effectively reduced to 9s. by one-tenth earned income relief. This was in fact the marginal rate only for single men, since the marginal rate for married men on average earnings was the reduced rate of 6s. 6d. No national insurance contributions were payable in these years. The rate includes post-war credits but is still the highest even when their credits are allowed for.
In recent years the highest marginal rate including national insurance contributions was 40.75 per cent. in 1976–77.
§ Mr. Michael Latham
asked the Chancellor of the Exchequer what would be the annual loss to the revenue, at current prices, if the maximum rate of income tax on unearned income were reduced to 50 per cent.
§ Mr. Robert Sheldon
, pursuant to his reply [Official Report, 13th December 1977; Vol. 941, c. 172], gave the following information:
On the assumption that investment income is treated as the top slice of taxable income, the cost of restricting the maximum rate of tax on investment income to 50 per cent. including any surcharge would be in the range £250-£400 million at 1977–78 levels of income. This assumes that earned incomes would continue to be taxed at marginal rates over 50 per cent where appropriate. An exact calculation of the cost could not be made without the expenditure of excessive time and effort.