Income Tax (Hansard, 2 May 1991)

§ Mr. Nicholas Brown
To ask the Chancellor of the Exchequer if he will publish a table showing the change in income tax in 1991–92 as against the 1978–79 indexed regime, broken down into the top 1 per cent., 5 per cent., 10 per cent. and bottom 50 per cent. of taxpayers showing the total change and the average gain.

§ Mr. Maude
Latest estimates of the annual change in income tax liability resulting from the changes in tax rates, allowances, and thresholds are in the table. The 1978–79 income tax regime has been indexed to 1991–92 levels by reference to the statutory formula, and allowing for independent taxation.
For the purposes of these calculations, the indexed regime 1978–79 has been applied directly to the income base of 1991–92. In practice, retention of the 1978–79 regime, indexed as appropriate, for the intervening years would have led to changes in the income base.

Reductions in income tax per individual¹ in 1991–92 compared with the 1978–79 indexed regime

Quantile group of individual taxpayers Total reductions 1991–92 prices Average reduction at 1991–92 prices

£ million £

Top 1 per cent. 8,600 30,900

Top 5 per cent. 12,500 9,000

Top 10 per cent. 15,000 5,400

Bottom 50 per cent. 4,000 300

All taxpayers 28,700 1,000

¹ Individuals liable to income tax under the 1978–79 indexed regime.

I regret that my reply to a related question on 15 April 1991, at columns 13–14, was incorrect. The corrected table is as follows.

Average reduction in income tax per individual in 1991–92 compared with 1978–79 indexed regime

Range of individual's income in 1991–92 Average reduction at 1991–92 income levels

£ £

Under 5,000 130

5,000–10,000 350

10,000–15,000 650

15,000–20,000 950

20,000–25,000 1,300

25,000–30,000 1,700

30,000–40,000 2,400

40,000–50,000 3,800

50,000–60,000 6,300

60,000–70,000 9,800

over 70,000 38,600

Total 1,000

§ Mr. Nicholas Brown
To ask the Chancellor of the Exchequer if he will estimate the effect on Treasury revenues in 1991–92 and in a full year of introducing an 297W alternative minimum tax of (a) 20 per cent. and (b) 25 per cent. of gross income on all taxpayers with a gross income over (i) £40,000, (ii) £45,000 and (iii) £50,000 a year.

§ Mr. Maude
The information is as follows:

Additional tax liability arising from introduction of alternative minimum tax on gross income 1991–92

Rate of minimum tax

Gross income of individual taxpayer (£) 20 per cent. £ million 25 per cent. £ million

Over 40,000 40 225

Over 45,000 30 115

Over 50,000 25 80

The estimates do not take account of any behavioural effects which might result from the introduction of the new arrangements.

§ Mr. Nicholas Brown
To ask the Chancellor of the Exchequer what would be the effect on Treasury revenues in 1991–92 and in a full year of a 1 per cent. cut in the basic rate of income tax; and what would be the cumulative effect after five years of an additional 1 per cent. cut each year, assuming indexation of the current structure of income tax.

§ Mr. Maude
A one penny cut in the basic rate of income tax in 1991–92 would have a direct revenue cost of about £1.9 billion in 1991–92 and £2.0 billion in 1992–93. The cost in a full year at 1991–92 levels of income would also be about £1.9 billion. Costs of changes in later years will depend on the growth of income.

§ Mr. Battle
To ask the Chancellor of the Exchequer if he will estimate the effect on Treasury revenues in 1991–92 of introducing higher rate bands of income tax equal to 45 per cent. on taxable incomes from £30,200 to £36,700 and 50 per cent. on taxable incomes over £36,700.

Increase¹ in personal allowances² Direct revenue effect (cost(-)/yield(+))

Receipts in 1991–92 In a full year at 1991–92 income levels

Compared with 1990–91 allowances Compared with statutory indexation Compared with 1990–91 allowances Compared with statutory indexation

£ million £ million £ million £ million

(i) 5 per cent. -0.9 +0.8 -1.1 +1.0

(ii) 10 per cent. -1.7 -0.1 -2.2 -0.1

(iii) 15 per cent. -2.5 -0.9 -3.2 -1.2

¹ Percentage increases are based on the 1990–91 levels of allowances.

² Excluding married couple's allowance for those aged under 65, additional personal allowance, and widows bereavement allowance.

Reductions in income tax per individual¹ in 1991–92 compared with the 1978–79 indexed regime
Quantile group of individual taxpayers	Total reductions 1991–92 prices	Average reduction at 1991–92 prices
	£ million	£
Top 1 per cent.	8,600	30,900
Top 5 per cent.	12,500	9,000
Top 10 per cent.	15,000	5,400
Bottom 50 per cent.	4,000	300
All taxpayers	28,700	1,000
¹ Individuals liable to income tax under the 1978–79 indexed regime.

Average reduction in income tax per individual in 1991–92 compared with 1978–79 indexed regime
Range of individual's income in 1991–92	Average reduction at 1991–92 income levels
£	£
Under 5,000	130
5,000–10,000	350
10,000–15,000	650
15,000–20,000	950
20,000–25,000	1,300
25,000–30,000	1,700
30,000–40,000	2,400
40,000–50,000	3,800
50,000–60,000	6,300
60,000–70,000	9,800
over 70,000	38,600
Total	1,000

Additional tax liability arising from introduction of alternative minimum tax on gross income 1991–92
	Rate of minimum tax
Gross income of individual taxpayer (£)	20 per cent. £ million	25 per cent. £ million
Over 40,000	40	225
Over 45,000	30	115
Over 50,000	25	80

Increase¹ in personal allowances²	Direct revenue effect (cost(-)/yield(+))
	Receipts in 1991–92	In a full year at 1991–92 income levels
	Compared with 1990–91 allowances	Compared with statutory indexation	Compared with 1990–91 allowances	Compared with statutory indexation
	£ million	£ million	£ million	£ million
(i) 5 per cent.	-0.9	+0.8	-1.1	+1.0
(ii) 10 per cent.	-1.7	-0.1	-2.2	-0.1
(iii) 15 per cent.	-2.5	-0.9	-3.2	-1.2
¹ Percentage increases are based on the 1990–91 levels of allowances.
² Excluding married couple's allowance for those aged under 65, additional personal allowance, and widows bereavement allowance.