§ Mr. Gwilym Robertsasked the Chancellor of the Exchequer if he will provide estimates of the tax yield from an increase in the standard rate of income tax to 40 per cent. and 50 per cent., respectively, if the existing personal allowances remained unchanged and if the allowances were increased by 25 per cent.; and in the latter case how many low-paid workers would pay less tax and how many would be taken out of taxation.
§ Mr. Robert Sheldon,pursuant to his reply [Official Report, 1st July 1975; Vol. 894, c. 388], supplied the following details:
62WFor 1975–76 the full-year tax yield from an increase in the basic rate of income tax to 40 per cent.—applied to the first £5,000 of taxable income—would be about £1,800 million. An increase in the basic rate to 50 per cent. —applied to the first £7,000 of taxable income—would yield about £5,500 million. In both cases it is assumed that rates above 40 per cent. and 50 per cent. respectively would remain unaltered.
An increase in the personal tax allowances by 25 per cent.—over the levels proposed for 1975–76—together with an increase in the basic rate of tax to 40 per cent. would cost about £550 million. About 1.4 million taxpayers in all, counting husband and wife as one, would be taken out of taxation and 12.3 million would pay less tax. The income level below which less tax would be paid varies with individual circumstances but for illustrative purposes, within the total numbers given above about 850,000 taxpayers would he taken out of tax and 2.5 million would pay less tax where the income of the taxpayer excluding wife's earnings and certain deductions was less than £1,500 a year. An increase in the personal tax allowances by 25 per cent. together with an increase in the basic rate of tax to 50 per cent. would yield about £2,600 million. About 1–4 million taxpayers would be taken out of taxation and 4 million would pay less tax. Of these about 850,000 would be taken out of tax and 1.7 million would pay less tax where the income—as above—was less than £1,500 a year.