HC Deb 19 February 1990 vol 167 cc520-1W
Mr. Chris Smith

To ask the Chancellor of the Exchequer by how much personal allowances would need to be increased, in cash and percentage terms, so that in conjunction with a one penny cut in the basic rate of tax, revenues remained the same, taking the impact of tax paid for someone on income levels from £5,000 up to £50,000 in steps of £5,000 and indicating the number of people brought into tax as a result of these changes.

Mr. Lilley

A one penny cut in the basic rate combined with a 1½ per cent. increase in allowances and the basic rate limit over their 1989–90 levels would cost about the same in a full year at 1990–91 income levels as indexing allowances and the basic rate limit by 7.7 per cent., the amount required for statutory indexation. The 1½per cent. increase in allowances would result in about 650,000 more individuals being liable to tax compared with indexation.

Estimates are based on a projection of the 1987–88 survey of personal incomes and are provisional. Further information is given in the tables:

Table 1: A 1½ per cent, increase in the 1989–90 levels of personal allowances and basic rate limit, compared with indexation, 1990–91
Allowance £
per annum
Personal allowance (aged under 65) -170
Personal allowance (aged 65–74) -220
Personal allowance (aged 75 and over) -220
Married couple's allowance (aged under 65) -100
Married couple's allowance (aged 65–74) -130
Married couple's allowance (aged 75 and over) -130
Additional personal and widow's bereavement allowance -100
Aged income limit -700
Taxable income bands
Basic rate limit -1,200

Table 2: Effect on Tax Liability of a 1½ per cent, increase in the 1989–90 levels of personal allowances and the basic rate limit and a one penny cut in the basic rate of tax, compared with indexation, 1990–91
Income Increase(+)IDecrease(-) in Tax Liability
£ Single Person1 Married Man2
per annum £ per annum £ per annum
5,000 20.85 62.05
10,000 -29.15 12.05
15,000 -79.15 -37.95
20,000 -129.15 -87.95
25,000 -8.75 -137.95
30,000 37.00 77.00
35,000 37.00 77.00
40,000 37.00 77.00
45,000 37.00 77.00
50,000 37.00 77.00
1Assumes single person receives no other tax allowances and reliefs except the personal allowance (aged under 65).
2Assumes married man with wife not working and no children, who receives no other tax allowances and reliefs except the personal allowance (aged under 65) and the married couple's allowance (aged under 65).