§ Mr. Silvester asked the Chancellor of the Exchequer (1)what would be the cost of introducing an income tax rate of 15 per cent. to apply to half the present 30 per cent. tax rate band, leaving other tax rates undisturbed;
§ (2) what changes would be necessary to higher rate bands to ensure that no tax benefit accrues to higher rate taxpayers if a lower rate band is introduced at 15 per cent. to apply to half the present 30 per cent. tax-rate band.
§ Mr. Moore[pursuant to his replies, 6 December 1985, c. 356]The direct revenue cost of introducing an income tax rate of 15 per cent. to apply to the first £8,100 of taxable income would be about £14.4 billion in a full year at 1985–86 income levels.
It is not possible to alter the higher rate structure to withdraw completely the benefit of the lower rate band from all existing higher rate taxpayers without also reducing the benefit which the band would give to those currently liable at the basic rate. By way of illustration, leaving the present higher rate structure as it stands but charging tax at 45 per cent. on taxable income between £8,100 and £16,200 would withdraw the whole of the 51W benefit of the lower rate band from higher rate taxpayers. This structure would, however, mean that taxable income between £16,200 and £19,200 would be charged at a lower rate (40 per cent.) than the taxable income between £8,100 and £16,200. The net cost of this rate structure (including the lower rate band of £8,100 at 15 per cent.) would be about £11. billion.