Taxation (Hansard, 15 May 1989)

§ Mr. Kirkwood
To ask the Chancellor of the Exchequer if he will update, to take account of the 1989 Budget, the information on tax changes contained in his reply of 21 October 1986 to the hon. Member for Oldham, West (Mr. Meacher)Official Report, columns 807–8.

§ Mr. Clay
To ask the Chancellor of the Exchequer if he will publish a table showing the reductions in income tax liabilities, 1989–90 income levels, of the proposed 1989–90 allowances, thresholds and rates in relation to the 1978–79 regime indexed to 1989–90 showing(a) the number of tax units, (b) the total amount of reduction and (c) the average reduction per tax unit in each of the following income ranges: under £5,000, £5,000 to £10,000, £10,000 to £15,000, £15,000 to £20,000, £20,000 to £30,000, £30,000 to £50,000 and over £50,000.

Income tax thresholds, tax free income and break-even points

Tax year Threshold at current prices£ Threshold at 1949–50 prices£ Threshold as percentage of average manual earnings¹ per cent. Tax free income² at current prices£ Tax free income at 1949–50 prices£ Tax free income as percentage of average manual earnings¹ per cent. Break-even point³ at current prices£ Break-even point³ at 1949–50 prices£ Break-even point³ as percentage of average manual earnings¹ per cent.

Single person

1978–79 985 17.1 22.0 985 171 22.0 n.a. n.a. n.a.

1989–90⁴ 2,785 214 23.5 2,785 214 23.5 n.a. n.a. n.a.

Married man—no children

1978–79 1,535 266 34.3 1,535 266 34.3 n.a. n.a. n.a.

1989–90⁴ 4,375 336 36.9 4,375 336 36.9 n.a. n.a. n.a.

Married man—with two children⁵

1978–79 1,735 300 38.8 2,002 346 44.7 2,727 472 61.0

1989–90⁴ 4,375 336 36.9 5,129 394 43.3 7,391 568 62.4

Married man—with four children⁶

1978–79 2,035 352 45.5 2,570 445 57.5 3,836 664 85.8

1989–90⁴ 4,375 336 36.9 5,883 452 49.6 10,407 800 87.8

¹ Average manual earnings are for full-time males aged over 21 working a full week.

² Tax-free income is defined as the tax threshold plus child benefit

³ Break-even point is the level of income at which income tax liability is equal to the money received through child benefit. It therefore gives the level of income above which the family pays more income tax than it obtains in benefits for children. Break-even points are not appropriate for families without children.

⁴ On the basis of the 1989 Budget proposals. Estimates of thresholds and break-even points as a percentage of earnings are provisional.

⁵ Both children aged under 11.

⁶ Two children aged under 11, one aged between 11 and 15 and one aged 16 or over.

§ Mr. Clay
To ask the Chancellor of the Exchequer if he will publish a table showing the reductions in income tax
18W
1989–90, personal allowances were to be reduced to their indexed 1978–79 levels total income tax liability would be increased by some £4.4 billion, distributed as follows:

§ Mr. Norman Lamont
[holding answer 10 May 1989]: I refer the hon. Members to my reply to the hon. Member for Oldham, West (Mr. Meacher) on 4 April 1989 at column 8.

§ Mr. Clay
To ask the Chancellor of the Exchequer if he will publish a table showing(a) the tax threshold. (b) tax free income and (c) break-even points at current prices, at 1949–50 prices and constant prices, as a percentage of average manual earnings for a single person, married man without children, married man with two children and married man with four children in 1978–79 and 1989–90.

§ Mr. Norman Lamont
[holding answer 10 May 1989]: The information is in the table.
liabilities, at 1989–90 income levels, of the proposed 1989–90 allowances, thresholds and rates in relation to the 19W 1978–79 regime indexed to 1989–90 showing (a) the number of tax units, (b) the total amount of reduction and (c) the average reduction per tax unit for the top 1 per cent., 5 per cent., 10 per cent. and 20 per cent. of taxpayers and the bottom 1 per cent., 5 per cent., 10 per cent., 20 per cent. and 50 per cent. of taxpayers.

Reductions in income tax liabilities in 1989–90 compared with the 1978–79 indexed tax regime

Point of income distribution¹ in 1989–90 Number of units² paying tax in 1989–90 '000 Total reduction in tax compared with the 1978–79 indexed regime £ million Average³ reduction in tax compared with the 1978–79 indexed regime £ per year

Top 1 per cent. 210 5,450 25,340

Top 5 per cent. 1,070 9,030 8,400

Top 10 per cent. 2,130 11,290 5,250

Top 20 per cent. 4,260 14,200 3,320

Bottom 10 per cent. 2,130 370 120

Bottom 20 per cent. 4,260 900 170

Bottom 50 per cent. 10,650 3,730 320

All taxpayers 21,300 23,260 1,030

¹ Based on numbers of tax units expected to pay tax in 1989–90.

² Married couples count as one unit.

³ Average reductions are calculated by reference to the estimated number of tax units who would be liable to pay tax under the indexed 1978–79 regime, this number is some 1,200,000 greater than the numbers paying tax in 1989–90, some 900,000 in this income range below £5,000 and 300,000 in the range £8,000–£ 10,000.

Income tax thresholds, tax free income and break-even points
Tax year	Threshold at current prices£	Threshold at 1949–50 prices£	Threshold as percentage of average manual earnings¹ per cent.	Tax free income² at current prices£	Tax free income at 1949–50 prices£	Tax free income as percentage of average manual earnings¹ per cent.	Break-even point³ at current prices£	Break-even point³ at 1949–50 prices£	Break-even point³ as percentage of average manual earnings¹ per cent.
Single person
1978–79	985	17.1	22.0	985	171	22.0	n.a.	n.a.	n.a.
1989–90⁴	2,785	214	23.5	2,785	214	23.5	n.a.	n.a.	n.a.
Married man—no children
1978–79	1,535	266	34.3	1,535	266	34.3	n.a.	n.a.	n.a.
1989–90⁴	4,375	336	36.9	4,375	336	36.9	n.a.	n.a.	n.a.
Married man—with two children⁵
1978–79	1,735	300	38.8	2,002	346	44.7	2,727	472	61.0
1989–90⁴	4,375	336	36.9	5,129	394	43.3	7,391	568	62.4
Married man—with four children⁶
1978–79	2,035	352	45.5	2,570	445	57.5	3,836	664	85.8
1989–90⁴	4,375	336	36.9	5,883	452	49.6	10,407	800	87.8
¹ Average manual earnings are for full-time males aged over 21 working a full week.
² Tax-free income is defined as the tax threshold plus child benefit
³ Break-even point is the level of income at which income tax liability is equal to the money received through child benefit. It therefore gives the level of income above which the family pays more income tax than it obtains in benefits for children. Break-even points are not appropriate for families without children.
⁴ On the basis of the 1989 Budget proposals. Estimates of thresholds and break-even points as a percentage of earnings are provisional.
⁵ Both children aged under 11.
⁶ Two children aged under 11, one aged between 11 and 15 and one aged 16 or over.

Reductions in income tax liabilities in 1989–90 compared with the 1978–79 indexed tax regime
Point of income distribution¹ in 1989–90	Number of units² paying tax in 1989–90 '000	Total reduction in tax compared with the 1978–79 indexed regime £ million	Average³ reduction in tax compared with the 1978–79 indexed regime £ per year
Top 1 per cent.	210	5,450	25,340
Top 5 per cent.	1,070	9,030	8,400
Top 10 per cent.	2,130	11,290	5,250
Top 20 per cent.	4,260	14,200	3,320
Bottom 10 per cent.	2,130	370	120
Bottom 20 per cent.	4,260	900	170
Bottom 50 per cent.	10,650	3,730	320
All taxpayers	21,300	23,260	1,030
¹ Based on numbers of tax units expected to pay tax in 1989–90.
² Married couples count as one unit.
³ Average reductions are calculated by reference to the estimated number of tax units who would be liable to pay tax under the indexed 1978–79 regime, this number is some 1,200,000 greater than the numbers paying tax in 1989–90, some 900,000 in this income range below £5,000 and 300,000 in the range £8,000–£ 10,000.