§ Mr. Allen
To ask the Chancellor of the Exchequer (1) how many people would pay more tax than they do at the present time if capital gains tax exemption were at the same level as the personal allowance; what is their average pre-tax income and the distribution of income; and what would be the average and distribution of increased capital gains tax payments;
(2) how many people would pay more tax if capital gains tax exemptions were £3,000; what is their average pre-tax income and the distribution of income; and what would be the average and distribution of increased payments.
§ Mr. Ryder
[holding answer 23 July 1990]: It is tentatively estimated that about 260,000 individuals and trusts would pay more capital gains tax in 1990–91 disposals if the annual exempt amount were reduced from £5,000 to either £3,000 or £3,005—the 1990–91 personal allowance—assuming a proportionate reduction in the annual exempt amount for trusts. About 100,000 of these 260,000 losers are not expected to pay capital gains tax on 1990–91 disposals under current rules. The full-year yield from this change is estimated to be about £70 million, implying an average additional payment of about £275 per loser, but estimates of the distribution of extra payments are not available. The estimates allow for some change in taxpayers' behaviour in response to the reduced annual exempt amount, but do not allow for possible short-term effects. No allowance has been made for any change in the treatment of capital gains of companies which are taxed within corporation tax.
Estimates of the income distribution of the 260,000 losers are not available. Some information about the taxable income of capital gains taxpayers in 1985–86 is available in table 11.5 of "Inland Revenue Statistics 1989".