§ Miss WiddecombeTo ask the Chancellor of the Exchequer what is his estimate of the total reduction in income tax liability from introducing independent taxation in 1990–91; and how that reduction will be distributed amongst taxpayers at different levels of income.
§ Mr. Norman LamontThe proposals for independent taxation of personal income outlined in the Budget are estimated to reduce income tax liability by about £670 million in a full year at 1990–91 levels of income and reduce income tax receipts by £500 million in 1990–91. The distribution of the full year cost by income of the individual taxpayers who benefit is as follows:
568W
Income £000s Cost £ million 0 to 5 260 5 to 10 100 10 to 15 60 15 to 20 50 20 to 25 50 25 to 30 50 30+ 100 All 670 The costs are estimated by comparing tax liabilities on husbands' and wives' incomes separately before and after independent taxation. Liability on the wife's income before independent taxation is estimated by treating her income as the top slice of the couple's income. The calculations assume that the 1988–89 income tax regime is indexed to 1990–91 by the statutory formula, and the composite rate of tax on bank and building society interest does not change between 1989–90 and 1990–91. Estimates are based on a projection of the distribution of the incomes of husbands and wives in the 1985–86 survey of personal income and are therefore provisional.