§ Mr. Malcolm BruceTo ask the Chancellor of the Exchequer if the yield in 1997–98 from higher rate income tax charged by direct assessment on investment income received net of lower rate income tax will be higher under the new system of self-assessment; and what estimate he has made of the extent of the difference. [26190]
§ Mr. Jack[holding answer 22 April 1996]: Self-assessment rationalises the payment dates for income tax, replacing the current plethora of dates and allowing a taxpayer's affairs to be brought together in one place and on one bill. Under self-assessment, payments on account will be required from certain taxpayers on 31 January within the tax year and on the following 31 160W July—broadly following the existing payment dates for the self-employed. Any balance will then be required at the following 31 January. For those taxpayers not required to make payments on account, the whole amount will be due on the following 31 January.
The transition from the old to the new pattern of payment dates will result in some one-off changes in Exchequer yields in 1997–98. Receipts of higher rate tax on investment income taxed at source will increase by £500 million because in-year payments on account of this tax will be required from some taxpayers from 1997–98, in contrast to the present arrangements whereby most such tax is collected in the following year. There will also be an offsetting reduction of £500 million in 1997–98 receipts of tax on rent and investment income not taxed at source because the bulk of 1997–98 tax will not be collected until the following year, whereas most of this tax is currently collected in-year—and this will also be true for 1996–97 tax. The £50 million shown in table 5.2 of the "Financial Statement and Budget Report 1996–97" as the net yield in 1997–98 from self-assessment reflects both these effects.
The figures in the "Financial Statement and Budget Report" assume that no payments on account would be required in January and July 1998 from those whose tax due in 1996–97 was less than £500 or who paid 80 per cent. or more of their 1996–97 tax liability through pay-as-you-earn or other reduction at source arrangements. These limits will be confirmed when Treasury regulations are laid later this year. Under self-assessment, higher rate taxpayers who do not need to make payments on account will generally pay higher rate tax on their investment income taxed at source later than they do at present.