§ Mr. Robert Sheldonasked the Chancellor of the Exchequer if he will set out in a table the effect of changes in income tax and national insurance contributions, mortgage relief, the change to mortgage income tax relief at source and the effect of tax clawbacks for underpayment of mortgage relief in 1982–83 on take-home pay of an individual assuming average gross earnings and an average mortgage, the table to show take-home pay in Budget week, the first pay-day after 6 April, the date when income tax changes take effect, and subsequent pay days.
§ Mr. Ridley[pursuant to the reply, 3 May 1983, c. 9]: The table is as follows: This has been compiled for a married man earning £.161.80 per week — estimated average male earnings for all occupations in 1982–83—with a new mortgage repayable over 25 years of £16,000—which is the average size of new mortgages taken out at the beginning of 1982–83. Mortgage interest rates were reduced from 13½ to 12 per cent. in September and to 10 per cent. in December 1982.
Line 7 of the table shows take-home pay after deduction of national insurance contributions and income tax collection through PAYE. PAYE codes were not generally changed in 1982–83 in response to the fall in interest rates, and excess mortgage interest relief— line 4(ii) of the table — was therefore allowed in the latter months of 1982–83. Taxpayers will repay this excess relief in 1983–84 through an adjustment to PAYE codes—line 4(iii).
Line 11 of the table shows take-home pay after the net mortgage payment to the lender.
63W
Weekly pay and deductions at average earnings for a married man with a mortgage of £16,000 taken out in 1982–83 £ per week August 1982 November 1982 Budget week First pay-day after 6 April '83 First pay-day after 10 May '83 Subsequent pay days Mortgage interest rate *13.5 *12 *10 *10 *10 *10 1. Average earnings 161.80 161.80 161.80 161.80 161.80 161.80 Deductions from pay 2. National insurance contributions† 14.16 14.16 14.16 14.56 14.56 14.56 Income tax 3. Tax due assuming married men's allowance only 34.43 34.43 34.43 34.43 22.31 32.41 Less 4. Mortgage interest relief given through PAYE (i) Relief due at prevailing rate of interest 12.46 11.07 9.23 — — — (ii) Excess relief included in PAYE code — 1.39 3.23 — — — (iii) Recovery of excess relief — — — -1.43 -1.43 -1.43 (iv) Total mortgage interest relief given through PAYE code=(i)+(ii)+(iii) 12.46 12.46 12.46 -1.43 -1.43 -1.43 5. Total income tax collected=3-4(iv) 21.97 21.97 21.97 35.86 23.74 33.84 6. Total deductions from pay=2+5 36.13 36.13 36.13 50.42 38.30 48.40 7. Take home pay before allowing for effect of mortgage payment to lender=1-6 125.67 125.67 125.67 111.38 123.50 113.40 8. Mortgage payment (gross) 43.38 39.25 33.93 ‡33.93 ‡33.93 ‡33.93 9. Less interest relief given at source — — — 9.23 9.23 9.23 10. Net mortgage payment to lender=8-9 43.38 39.25 33.93 ‡24.70 ‡24.70 ‡24.70 11. Take home pay after net mortgage payment to lender=7-10 82.29 86.42 91.74 ‡86.68 ‡98.80 ‡88.70 * Percentage. † National Insurance Contributions at the contracted-in-rate. ‡ Assuming that, if the lender has proposed a switch to a "constant net" basis of repayments, the borrower has exercised his right to keep his payments at the lower level provided for by Section 28 of the Finance Act 1982. If the borrower has not exercised that right, his net payments to the lender would be £1.74 a week higher, and the figures in lines 7, 10 and 11 in the last three columns would be—
First pay day after 6 April First pay day after 10 May Subsequent pay days £ £ £ 7. Take home pay 111.38 123.50 113.40 10. Net mortgage payment to lender=8 minus 9 26.44 26.44 26.44 11. Take home pay after net mortgage payment to lender=7 minus 10 84.94 97.06 86.96