§ Sir Peter HordernTo ask the Chancellor of the Exchequer what would be the cost of reducing the top rate of income tax from 60 per cent. to 50 per cent. and what would be the gain to the Exchequer if personal allowances for those who paid the original rate of 50 per cent. and above were not raised in line with inflation, on income which attracts income tax at that level and above.
§ Mr. Norman LamontThe cost of reducing the 55 per cent. and 60 per cent. rates of income tax to 50 per cent. would be £530 million in a full year at 1988–89 levels of income. The cost assumes that 1987–88 personal allowances and tax bands are indexed to 1988–89 levels according to the statutory provisions. The yield from not indexing personal allowances for those liable to rates of 50 per cent. or more under indexation would be about £50 million.
§ Mr. Gordon BrownTo ask the Chancellor of the Exchequer (1) if he will update his reply of 10 April 1986,Official Report, columns 191–92, to give the tax band table for 1986–87, 1987–88 and his estimate for 1988–89;
(2) how many people in work or in receipt of unearned income paid (a) no income tax and (b) tax at top rate of (i) 60 per cent., (ii) 55 per cent., (iii) 50 per cent., (iv) 45 per cent., (v) 40 per cent., and (vi) 27 per cent. for the two years ended 1986–87, with estimates for the year ended 1987–88; and what was the total tax yield from each of the above groups for 1986–87.
§ Mr. Norman Lamont[holding answers 26 and 27 January 1988]: Information is in the tables. All estimates are provisional. Estimates of the number of taxpayers by marginal rate in 1988–89 are not available.
Number of tax units (thousands) 1985–86 1986–87 1987–88 Marginal rate1 Basic rate2 19,400 19,400 19,700 40 per cent. 400 410 390 45 per cent. 290 290 330 50 per cent. 160 170 210 55 per cent. 70 80 100 60 per cent. 100 110 140 Total higher rate 1,020 1,060 1,170 Total paying tax 20,400 20,500 20,900 Total3 not liable to tax 5,300 5,500 5,500 418W
Income tax liabilities by marginal rate1 of tax unit (£ million) 1986–87 Marginal rate1 Basic rate2 29,630 40 per cent. 2,360 45 per cent. 2,220 50 per cent. 1,820
1986–87 55 per cent. 1,240 60 per cent. 3,800 Total tax from higher rate tax units 11,450 Total tax liabilities 41,080 1 The marginal rate is taken as the higher of the marginal rates for married couples making a wife's earnings election. 2 The basic rates are 30 per cent. for 1985–86, 29 per cent. for 1986–87, and 27 per cent. for 1987–88 and 1988–89. 3 ie the total with earned income or investment income.