Income Tax (Hansard, 19 February 1990)

§ Mr. Chris Smith
To ask the Chancellor of the Exchequer how many households where the woman is the single earner will lose their present entitlement to the additional tax allowance in 1990–91 as a result of Government proposals for independent taxation.

§ Mr. Lilley
Under existing law a husband who does not have sufficient income to make full use of the married man's allowance can transfer any surplus to his wife. Under independent taxation he will be able to transfer any surplus married couple's allowance but his personal allowance is not transferable. However, where the married man's allowance was transferred to a wife in 1989–90 the transitional arrangements announced in the 1988 Budget will mean that, in addition to her own personal allowance and the transferred married couple's allowance, the wife will receive a further allowance. This will ensure that the couple's total allowances in 1990–91 are not less than their total allowances in 1989–90 as a result of the change to independent taxation. It is estimated that in 1990–91 just under 200,000 married couples will benefit from this transitional relief.

§ Mr. Chris Smith
To ask the Chancellor of the Exchequer how many single people and married couples do not pay tax in 1989–90.

§ Mr. Lilley
Provisional estimates of the numbers of adult non-taxpayers in 1989–90 are 7.7 million single people and 3.2 million married couples.

§ Mr. Allen
To ask the Chancellor of the Exchequer what the reduction in the standard rate of income tax would need to be to secure a £216 per annum benefit to the average taxpayer.

§ Mr. Lilley
Estimates for a single person and a married man on average male earnings in 1990–91 are given in the table:

Reduction in income tax from a cut in basic rate in 1990–91

Reduction Gain to individual

Per cent. £ per annum

Single person¹ 1.5 ²191.89

Married man¹ 2.0 ²221.45

¹ Assuming average earnings for full time adult males in all occupations. In 1990–91, they are assumed to be £303.8 per week; in line with the assumptions of the growth in average earnings in 1989–90 and 1990–91 (from £256.3 per week in 1988–89) as published in paragraph 3.02 of the 1989 Autumn Statement.

² Calculations assume that 1989–90 personal allowances and the basic rate limit have been indexed by 7.7 per cent, to 1990–91. The gain to an individual quoted in the table is that figure closest to £216 per annum obtainable from a basic rate reduction to the nearest ½ per cent.

§ Mr. Nicholas Brown
To ask the Chancellor of the Exchequer how many tax units would become liable for 523W income tax in 1990–91 if personal allowances were frozen at their 1989–90 level; and how many of these would face marginal tax and benefit withdrawal rates of (a) 40 per cent. or over, (b) 60 per cent. or over, (c) 80 per cent. or over and (d) 90 per cent. or over.

§ Mr. Lilley
[holding answer 9 February 1990]: In 1990–91 it is estimated that just over half a million single people and married couples would be brought into tax if personal allowances were frozen at their 1989–90 levels in 1990–91. The estimate is based on a projection of the 1987–88 survey of personal incomes and is provisional.
Estimates by marginal rate of tax and benefit withdrawal are a matter for my right hon. Friend the Secretary of State for Social Security.

Reduction in income tax from a cut in basic rate in 1990–91
	Reduction	Gain to individual
	Per cent.	£ per annum
Single person¹	1.5	²191.89
Married man¹	2.0	²221.45
¹ Assuming average earnings for full time adult males in all occupations. In 1990–91, they are assumed to be £303.8 per week; in line with the assumptions of the growth in average earnings in 1989–90 and 1990–91 (from £256.3 per week in 1988–89) as published in paragraph 3.02 of the 1989 Autumn Statement.
² Calculations assume that 1989–90 personal allowances and the basic rate limit have been indexed by 7.7 per cent, to 1990–91. The gain to an individual quoted in the table is that figure closest to £216 per annum obtainable from a basic rate reduction to the nearest ½ per cent.