Income Tax (Hansard, 8 November 1995)

§ Mr. Bayley
To ask the Chancellor of the Exchequer if he will provide updated figures using the September retail prices index for tables 2, 3, 4, 5, 6, 7, 8 and 9 of the tax ready reckoner and tax reliefs giving for each table the effect in 1996–97 and a full year. [40774]

§ Mr. Jack
[holding answer 31 October 1995]: Revised figures are in the tables.
905W

Table 2

Income tax

1995–96 £ 1996–97 £

Personal allowance 3,525 3,665

Personal allowance (age 65–74) 4,630 4,810

Personal allowance (age 75 and over) 4,800 4,990

Married couple's allowance¹ 1,720 1,790

Married couple's allowance (age 65–75)¹ 2,995 3,115

Married couple's allowance (age 75 and over)¹ 3,035 3,155

Additional personal^1,2 and widow's bereavement allowance¹ 1,720 1,790

Aged income limit³ 14,600 15,200

Lower rate band 3,200 3,400

Basic rate limit⁴ 24,300 25,300

¹Allowance available at a flat rate of 15 per cent.

²Primarily for single parents.

³If the total income, less allowable deductions, of a taxpayer aged 65 or over exceeds this limit, the age-related allowances are reduced by £1 for each £2 of income over the limit until the basic levels of the personal and married couple's allowances are reached.

⁴Higher rate income tax is payable on income (less those allowances and reliefs that are allowed at the higher rate) in excess of the basic rate limit.

Table 5

Cost of indexation for 1996–97

£ million

1996–97 1997–98

Indexation of income tax allowances, lower rate band and basic rate limit¹ 1,190 1,880

of which:

increases in allowances 810 1,170

increase in the lower rate band² 150 300

increase in the basic rate limit² 230 410

Indexation of inheritance tax threshold 25 45

Indexation of capital gains tax annual exempt amount 0 3

¹Includes the consequential effects on capital gains tax.

²Additional cost after previous change has been introduced.

Table 6

Direct effects of illustrative changes in income tax¹

£ million

Full year cost/yield Receipts cost/yield

Income tax² 1996–97 1996–97 1997–98

Rates

Change lower rate by 1p³ 560 850 720

Change basic rate by 1p 1,900 1,600 2,000

Change higher rate by 1p 460 240 560

Allowances

Change personal allowance by £100 590 430 640

Change age-related personal allowance by £100⁴ 60 45 60

Change married couple's allowance by £100⁵ 150 120 160

Change age-related married couple's allowance by £100⁴ 15 11 15

Change aged income limit by £500 13 8 14

Change all personal allowances by 1 per cent.⁶ 240 180 260

Change all personal allowance by 10 per cent.⁶ 2,530 1,750 2,550

Change married couple's and related allowances by 1 per cent.⁶ 30 20 30

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Table 6

Direct effects of illustrative changes in income tax¹

£ million

Full year cost/yield Receipts cost/yield

Income tax² 1996–97 1996–97 1997–98

Change married couple's and related allowances by 10 per cent.⁶ 300 220 330

Lower rate band

Increase lower rate band by 10 per cent. ⁶ 320 240 350

Basic rate limit

Change basic rate limit by 1 per cent.⁶ 80 50 95

Change basic rate limit by 10 per cent.⁶

increase (cost) 750 450 870

decrease (yield) 930 580 1,100

Allowances, lower rate band and basic rate limit

Change all main allowances, lower rate band and basic rate limit by 1 per cent. ⁶ 380 280 420

Change all main allowances, lower rate band and basic rate limit by 10 per cent. ⁶

increase (cost) 3,700 2,650 4,100

decrease (yield) 4,050 2,900 4,500

¹The estimated revenue effects of changes on receipts are rounded. The extent of rounding reflects the desire to avoid undue compounding of its effects when numbers are pro-rated, rather than the accuracy of the estimates.

²The figures for income tax changes include consequential effects on the yield of capital gains tax. Changes are assumed to take effect from April 1996.

³Including the effects of the change on receipts of advance corporation tax and on consequent liability to mainstream corporation tax.

⁴Allowances for those aged 65–74 and aged 75 and over.

⁵The figures include the revenue effects of changing the additional personal allowance and the widow's bereavement allowance by £100.

⁶Percentage changes are calculated with reference to 1995–96 levels.

Table 7

Direct effects of illustrative changes in other direct taxes and national insurance contributions¹

£ million

Full year cost/yield Receipts cost cost/yield

1996–97 1996–97 1997–98

Corporation tax²

Change full rate by 1 percentage point 880 630 940

Change small companies' rate by 1 percentage point³ 130 90 140

Capital gains tax⁴

Increase annual exempt amount by £500 for individuals and £250 for trustees 6 0 4

Inheritance tax⁴

Change rate by 1 percentage point 45 20 38

Increase threshold by £5,000 40 19 37

¹The estimated revenue effects of changes on receipts are rounded. The extent of rounding reflects the desire to avoid undue compounding of its effects when numbers are pro-rated, rather than the accuracy of the estimates.

²Assessment to corporation tax normally relates to the preceding year. These estimates are the changes to revenue that would occur if the changed rates were applied to profits from 1 April 1995.

³These figures ignore effects arising from the imputation system.

⁴These changes are assumed to take effect from April 1996.

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Table 8

Direct effects of revalorising all excise duties by 3.9 per cent.¹

Typical item Current level of duty on typical item Price change²

Pint of beer 24.6p 1.1p

75cl bottle of table wine 105.33p 4.8p

70cl bottle of spirits £5.77 26.4p

20 king size cigarettes³ £1.69 13.8p

Litre of unleaded petrol⁴ 31.3p 3.3p

Litre of DERV⁴ 31.3p 3.3p

VED⁵ £135 £5.27

¹These are estimated on the assumption that total consumers' expenditure at factor cost does not change.

²The price change is assumed to equal the change in duty plus the consequential VAT except in the case of VED where VAT is not payable. The price change is for the typical item described above and rounded to the nearest one-tenth of a pence.

Table 9

Direct effects of illustrative changes in indirect taxes¹

^3,4£ million cost/yield

Price change of typical item² Associated percentage change in duty 1995–96 1996–97 1997–98

Beer and cider 1p 3.5 15 105 110

Wine 5p 4.0 5 30 35

Spirits 25p 3.7 5 25 25

Tobacco⁵ 5p 2.8 40 180 190

Petrol⁶ 1p 2.6 75 310 340

Derv 1p 2.7 40 150 170

VED⁷ £5.00 3.7 50 150 150

Air passenger duty^8,9 50p/£l 10.0 10 35 35

1 percentage point change in VAT standard rate⁸ 190 2,480 2,610

1 percentage point change in rate of insurance premium tax⁸ 20 270 285

¹These are estimated on the assumption that total consumers' expenditure at factor cost does not change.:

²The price change is assumed to equal the change in duty plus the consequential VAT except in the case of VED where VAT is not payable. The price change is for the typical item described above and rounded to the nearest one-tenth of a pence.

³Assuming implementation on 1 January 1996 for alcohol and on Budget day for all other duties.

⁴Revenue effects include effects of changed duty on all items in the same category by the same percentage. Estimates are subject to uncertainty about the extent to which consumers would switch between different categories of expenditure. This is particularly so for switching from one type of alcoholic drink to another.

⁵The duty on cigarettes has ad valorem and specific elements; revalorisation relates to total duty and the illustrative percentage change relates only to the specific element, but the price change includes the consequential increase in ad valorem duty hand VAT. The figures are for an increase of 3 per cent, above revalorisation to reflect the commitment to raise tobacco duties by at least 3 per cent, in real terms in future budgets announced in November 1993.

⁶Revenue effects assume duty on both leaded and unleaded petrol is changed by the same percentage.

⁷All VED, including HGVs as well as cars and light vans.

⁸Assuming implementation from Budget day.

⁹Current duty rates are £5 and £10 depending on destination.

§ Mr. Bayley
To ask the Chancellor of the Exchequer (1) if he will estimate the effect on(a) tax revenue and (b) benefit expenditure of increasing (i) the married couple's allowance, (ii) the additional personal allowance and (iii) the widow's bereavement allowance by (A) £100, (B) £200 and (C) £300; [42287]
(2) what would be the effect on (a) tax revenue and (b) benefit expenditure of introducing a tax allowance of £300 per child for taxpayers with children (i) under 11 years of age and (ii) under 16 years of age, giving relief at (A) the taxpayers' marginal rate, (B) the 25 per cent. rate, (C) the 20 per cent. rate and (D) the 15 per cent. rate. [42285]
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³The duty on cigarettes has ad valorem and specific elements; revalorisation relates to total duty and the illustrative percentage change relates only to the specific element, but the price change includes the consequential increase in ad valorem duty and VAT. The figures are for an increase of 3 per cent. above revalorisation to reflect the commitment to raise tobacco duties by at least 3 per cent. in real terms in future budgets announced in November 1993.
⁴The figures are for an increase of 5 per cent. above revalorisation to reflect the commitment to raise fuel duties by at least 5 per cent. in real terms in future Budgets announced in November 1993.
⁵Cars and light vans.

¹£ million cost/yield

Year Revalorisation of all excise duties by 3.9 per cent

1995–96 415

1996–97 1,750

1997–98 1,875

Impact effect on the RPI per cent. 0.51

¹Assuming implementation on 1 January 1996 for alcohol and on Budget day for all other duties.

1. Includes receipts from taxes on items not listed above.

§ Mr. Jack
Estimated full-year tax costs at 1996–97 income levels are given in the table. The benefit offset will depend on take-up and other factors, but it is likely to he small relative to the total cost.

Full year revenue tax costs of increasing allowances at 1996–97 levels

£ million

Increase Married couples allowance Additional personal allowance Widow's bereavement allowance

100 150 10 less than 5 million

200 300 20

300 450 30

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Full year revenue tax costs at 1996–97 levels

£ million

Introduction of child tax allowance of £300 per child available at: Children under 11 Children under 16

marginal rate 460 730

25 per cent. 430 670

20 per cent. 340 540

15 per cent. 260 400

§ Mr. Nigel Griffiths
To ask the Chancellor of the Exchequer if he will list for all taxpayers the effect on revenue yield in 1995–96 resulting from changes since 1987–88 and 1990–91 in the eligibility, rates or amounts of allowances and reliefs, including MIRAS, available for offset against income tax, after allowing for indexation. [39108]

§ Mr. Jack
Comparisons at 1995–96 income levels using the higher tax rates from the earlier years and with income tax allowances and rate bands indexed in line with changes in the retail prices index are given in the table. These are based on a projection of the 1993–94 survey of personal incomes. The effect of changes in mortgage interest relief cannot be estimated from this source because most mortgage interest relief is given at source and therefore is not included in individual tax records.

Tax regime applied to 1995–96 incomes Total income tax liability before mortgage interest relief £ billion

1987–88 indexed 84.7

1990–91 indexed 80.2

1995–96 actual 74.7

Numbers: Thousands

Taxpayers with employment or self-employment income Total taxpayers Taxpayers liable only at 20 per cent, rate Percentage liable only 20 per cent, rate

Wales 970 1,110 290 24

Mid Glamorgan 170 200 50 25

Merthyr Tydfil/Rhymney Valley 50 55 ¹— ¹—

¹ Estimates cannot be provided due to low number of sample survey cases in the Survey of Personal Incomes sample.

Table 2
Income tax
	1995–96 £	1996–97 £
Personal allowance	3,525	3,665
Personal allowance (age 65–74)	4,630	4,810
Personal allowance (age 75 and over)	4,800	4,990
Married couple's allowance¹	1,720	1,790
Married couple's allowance (age 65–75)¹	2,995	3,115
Married couple's allowance (age 75 and over)¹	3,035	3,155
Additional personal^1,2 and widow's bereavement allowance¹	1,720	1,790
Aged income limit³	14,600	15,200
Lower rate band	3,200	3,400
Basic rate limit⁴	24,300	25,300
¹Allowance available at a flat rate of 15 per cent.
²Primarily for single parents.
³If the total income, less allowable deductions, of a taxpayer aged 65 or over exceeds this limit, the age-related allowances are reduced by £1 for each £2 of income over the limit until the basic levels of the personal and married couple's allowances are reached.
⁴Higher rate income tax is payable on income (less those allowances and reliefs that are allowed at the higher rate) in excess of the basic rate limit.

Table 5
Cost of indexation for 1996–97
£ million
	1996–97	1997–98
Indexation of income tax allowances, lower rate band and basic rate limit¹	1,190	1,880
of which:
increases in allowances	810	1,170
increase in the lower rate band²	150	300
increase in the basic rate limit²	230	410
Indexation of inheritance tax threshold	25	45
Indexation of capital gains tax annual exempt amount	0	3
¹Includes the consequential effects on capital gains tax.
²Additional cost after previous change has been introduced.

Table 6
Direct effects of illustrative changes in income tax¹
£ million
	Full year cost/yield	Receipts cost/yield
Income tax²	1996–97	1996–97	1997–98
Rates
Change lower rate by 1p³	560	850	720
Change basic rate by 1p	1,900	1,600	2,000
Change higher rate by 1p	460	240	560
Allowances
Change personal allowance by £100	590	430	640
Change age-related personal allowance by £100⁴	60	45	60
Change married couple's allowance by £100⁵	150	120	160
Change age-related married couple's allowance by £100⁴	15	11	15
Change aged income limit by £500	13	8	14
Change all personal allowances by 1 per cent.⁶	240	180	260
Change all personal allowance by 10 per cent.⁶	2,530	1,750	2,550
Change married couple's and related allowances by 1 per cent.⁶	30	20	30

Table 7
Direct effects of illustrative changes in other direct taxes and national insurance contributions¹
£ million
	Full year cost/yield	Receipts cost cost/yield
	1996–97	1996–97	1997–98
Corporation tax²
Change full rate by 1 percentage point	880	630	940
Change small companies' rate by 1 percentage point³	130	90	140
Capital gains tax⁴
Increase annual exempt amount by £500 for individuals and £250 for trustees	6	0	4
Inheritance tax⁴
Change rate by 1 percentage point	45	20	38
Increase threshold by £5,000	40	19	37
¹The estimated revenue effects of changes on receipts are rounded. The extent of rounding reflects the desire to avoid undue compounding of its effects when numbers are pro-rated, rather than the accuracy of the estimates.
²Assessment to corporation tax normally relates to the preceding year. These estimates are the changes to revenue that would occur if the changed rates were applied to profits from 1 April 1995.
³These figures ignore effects arising from the imputation system.
⁴These changes are assumed to take effect from April 1996.

Table 8
Direct effects of revalorising all excise duties by 3.9 per cent.¹
Typical item	Current level of duty on typical item	Price change²
Pint of beer	24.6p	1.1p
75cl bottle of table wine	105.33p	4.8p
70cl bottle of spirits	£5.77	26.4p
20 king size cigarettes³	£1.69	13.8p
Litre of unleaded petrol⁴	31.3p	3.3p
Litre of DERV⁴	31.3p	3.3p
VED⁵	£135	£5.27
¹These are estimated on the assumption that total consumers' expenditure at factor cost does not change.
²The price change is assumed to equal the change in duty plus the consequential VAT except in the case of VED where VAT is not payable. The price change is for the typical item described above and rounded to the nearest one-tenth of a pence.

Table 9
Direct effects of illustrative changes in indirect taxes¹
^3,4£ million cost/yield
	Price change of typical item²	Associated percentage change in duty	1995–96	1996–97	1997–98
Beer and cider	1p	3.5	15	105	110
Wine	5p	4.0	5	30	35
Spirits	25p	3.7	5	25	25
Tobacco⁵	5p	2.8	40	180	190
Petrol⁶	1p	2.6	75	310	340
Derv	1p	2.7	40	150	170
VED⁷	£5.00	3.7	50	150	150
Air passenger duty^8,9	50p/£l	10.0	10	35	35
1 percentage point change in VAT standard rate⁸			190	2,480	2,610
1 percentage point change in rate of insurance premium tax⁸			20	270	285
¹These are estimated on the assumption that total consumers' expenditure at factor cost does not change.:
²The price change is assumed to equal the change in duty plus the consequential VAT except in the case of VED where VAT is not payable. The price change is for the typical item described above and rounded to the nearest one-tenth of a pence.
³Assuming implementation on 1 January 1996 for alcohol and on Budget day for all other duties.
⁴Revenue effects include effects of changed duty on all items in the same category by the same percentage. Estimates are subject to uncertainty about the extent to which consumers would switch between different categories of expenditure. This is particularly so for switching from one type of alcoholic drink to another.
⁵The duty on cigarettes has ad valorem and specific elements; revalorisation relates to total duty and the illustrative percentage change relates only to the specific element, but the price change includes the consequential increase in ad valorem duty hand VAT. The figures are for an increase of 3 per cent, above revalorisation to reflect the commitment to raise tobacco duties by at least 3 per cent, in real terms in future budgets announced in November 1993.
⁶Revenue effects assume duty on both leaded and unleaded petrol is changed by the same percentage.
⁷All VED, including HGVs as well as cars and light vans.
⁸Assuming implementation from Budget day.
⁹Current duty rates are £5 and £10 depending on destination.

¹£ million cost/yield
Year	Revalorisation of all excise duties by 3.9 per cent
1995–96	415
1996–97	1,750
1997–98	1,875
Impact effect on the RPI	per cent. 0.51
¹Assuming implementation on 1 January 1996 for alcohol and on Budget day for all other duties.

Full year revenue tax costs of increasing allowances at 1996–97 levels
£ million
Increase	Married couples allowance	Additional personal allowance	Widow's bereavement allowance
100	150	10	less than 5 million
200	300	20
300	450	30

Full year revenue tax costs at 1996–97 levels
£ million
Introduction of child tax allowance of £300 per child available at:	Children under 11	Children under 16
marginal rate	460	730
25 per cent.	430	670
20 per cent.	340	540
15 per cent.	260	400

Tax regime applied to 1995–96 incomes	Total income tax liability before mortgage interest relief £ billion
1987–88 indexed	84.7
1990–91 indexed	80.2
1995–96 actual	74.7

Numbers: Thousands
	Taxpayers with employment or self-employment income	Total taxpayers	Taxpayers liable only at 20 per cent, rate	Percentage liable only 20 per cent, rate
Wales	970	1,110	290	24
Mid Glamorgan	170	200	50	25
Merthyr Tydfil/Rhymney Valley	50	55	¹—	¹—
¹ Estimates cannot be provided due to low number of sample survey cases in the Survey of Personal Incomes sample.