HC Deb 22 January 1990 vol 165 cc538-9W
Mr. Soley

To ask the Chancellor of the Exchequer (1) how many(a) first-time buyers in the first five years of home onwership and (b) other home owners, would be expected to benefit from an increase in the ceiling for mortgage interest tax relief above the current £30,000 limit; what percentage of all home buyers in each category this would represent; and what would be the cost of the increased benefit to each group were the ceiling to be raised to (i) £35,000, (ii) £40,000 and (iii) £50,000, respectively;

(2) what would be the cost of adjusting the maximum ceiling for mortgage interest tax relief to (a) £35,000, (b) £40,000, (c) £45,000 and (d) £50,000, on the assumption that (i) relief continues to be available at the higher marginal tax rate where applicable, and (ii) that relief is restricted to the standard 25 per cent. rate of income tax.

Mr. Lilley

I regret that information on mortgage interest relief for first-time buyers in the first five years of home ownership is not available. Provisional estimates of the costs of increasing the ceiling are given in the table. All estimates exclude behavioural effects, which would be substantial for the higher ceilings.

Direct revenue costs at 1989–90 income levels of raising the ceiling for mortgage interest relief
Ceiling Relief at marginal tax rate £ million Relief at basic rate of 25 per cent. £ million
£35,000 320 -140
£40,000 580 90
£45,000 770 270
£50,000 900 390

Increasing the ceiling for mortgage interest relief 1989–90
Total Income £ Number of beneficiaries thousands Average gain if ceiling is increased to
£35,000

£

 £40,000

£

 £45,000

£

 £50,000

£
Up to 5,000 20 160 250 290 330
5,000—10,000 140 130 230 290 320
10,000—15,000 360 150 260 330 380
15,000—20,000 520 160 270 360 410
20,000—25,000 400 160 290 390 450
25,000—30,000 220 160 290 390 470
Over 30,000 390 190 350 470 580
TOTAL 2,050 160 280 380 440

If relief was restricted to the basic rate at the same time as the ceiling was increased, the number of beneficiaries with incomes above £30,000 would be reduced. About 190,000 basic rate taxpayers would still benefit, and about 70,000 higher rate taxpayers with mortgages above £48,000 would be net beneficiaries if the ceiling were raised to that level or above.