Income Tax (Hansard, 15 February 1988)

§ Sir Peter Hordern
To ask the Chancellor of the Exchequer what would be the cost of reducing the top rate of income tax from 60 per cent. to 50 per cent. and what would be the gain to the Exchequer if personal allowances for those who paid the original rate of 50 per cent. and above were not raised in line with inflation, on income which attracts income tax at that level and above.

§ Mr. Norman Lamont
The cost of reducing the 55 per cent. and 60 per cent. rates of income tax to 50 per cent. would be £530 million in a full year at 1988–89 levels of income. The cost assumes that 1987–88 personal allowances and tax bands are indexed to 1988–89 levels according to the statutory provisions. The yield from not indexing personal allowances for those liable to rates of 50 per cent. or more under indexation would be about £50 million.

§ Mr. Gordon Brown
To ask the Chancellor of the Exchequer (1) if he will update his reply of 10 April 1986,Official Report, columns 191–92, to give the tax band table for 1986–87, 1987–88 and his estimate for 1988–89;
(2) how many people in work or in receipt of unearned income paid (a) no income tax and (b) tax at top rate of (i) 60 per cent., (ii) 55 per cent., (iii) 50 per cent., (iv) 45 per cent., (v) 40 per cent., and (vi) 27 per cent. for the two years ended 1986–87, with estimates for the year ended 1987–88; and what was the total tax yield from each of the above groups for 1986–87.

§ Mr. Norman Lamont
[holding answers 26 and 27 January 1988]: Information is in the tables. All estimates are provisional. Estimates of the number of taxpayers by marginal rate in 1988–89 are not available.

Number of tax units (thousands)

1985–86 1986–87 1987–88

Marginal rate¹

Basic rate² 19,400 19,400 19,700

40 per cent. 400 410 390

45 per cent. 290 290 330

50 per cent. 160 170 210

55 per cent. 70 80 100

60 per cent. 100 110 140

Total higher rate 1,020 1,060 1,170

Total paying tax 20,400 20,500 20,900

Total³ not liable to tax 5,300 5,500 5,500

Income tax liabilities by marginal rate¹ of tax unit (£ million)

1986–87

Marginal rate¹

Basic rate² 29,630

40 per cent. 2,360

45 per cent. 2,220

50 per cent. 1,820

418W

1986–87

55 per cent. 1,240

60 per cent. 3,800

Total tax from higher rate tax units 11,450

Total tax liabilities 41,080

¹ The marginal rate is taken as the higher of the marginal rates for married couples making a wife's earnings election.

² The basic rates are 30 per cent. for 1985–86, 29 per cent. for 1986–87, and 27 per cent. for 1987–88 and 1988–89.

³ ie the total with earned income or investment income.

Number of tax units (thousands)
	1985–86	1986–87	1987–88
Marginal rate¹
Basic rate²	19,400	19,400	19,700
40 per cent.	400	410	390
45 per cent.	290	290	330
50 per cent.	160	170	210
55 per cent.	70	80	100
60 per cent.	100	110	140
Total higher rate	1,020	1,060	1,170
Total paying tax	20,400	20,500	20,900
Total³ not liable to tax	5,300	5,500	5,500

Income tax liabilities by marginal rate¹ of tax unit (£ million)
	1986–87
Marginal rate¹
Basic rate²	29,630
40 per cent.	2,360
45 per cent.	2,220
50 per cent.	1,820

	1986–87
55 per cent.	1,240
60 per cent.	3,800
Total tax from higher rate tax units	11,450
Total tax liabilities	41,080
¹ The marginal rate is taken as the higher of the marginal rates for married couples making a wife's earnings election.
² The basic rates are 30 per cent. for 1985–86, 29 per cent. for 1986–87, and 27 per cent. for 1987–88 and 1988–89.
³ ie the total with earned income or investment income.