§ Lord Eltonasked Her Majesty's Government:
Further to the Written Answer by the Lord McIntosh of Haringey on 25 May (WA 125) regarding taxation, whether they will publish this information in the Official Report. [HL3099]
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§ The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey)My earlier Answer explained precisely where the information concerned could be found on the Inland Revenue website. The practice of referring to departmental websites has been followed
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Direct effects of illustrative tax changes1 Amounts: £ million Cost/yield 2004–05 2005–062 2004–05 2005–062 (full year) (full year) (NABs) (NABs) Income tax3 Rates Change starting rate by 1p4 560 590 490 610 Change lower rate on savings income by 1p5 80 100 60 90 Change basic rate by 1p6 3,300 3,450 2,900 3,600 Change basic rate in Scotland by 1p6 270 280 240 290 Change higher rate by 1p 1,090 1,190 800 1,270 Change higher rate for dividends by 1p 120 125 — 150 Allowances Change personal allowance by £100 610 640 520 660 Change age-related personal allowances by £1007 65 70 60 70 Change age-related married couple's allowances by £1008 5 5 5 5 Change aged income limit by £500 25 25 15 25 Change all pesonal allowances by 1 per cent 320 340 280 360 Change all personal allowances by 10 per cent 3,200 3,350 2,750 3,500 Limits Change starting rate limit by £100 310 330 270 340 Change basic rate limit by 1 per cent 190 210 140 220 Change basic rate limit by 10 per cent Increase (cost) 1,750 1,900 1,300 2,000 Decrease (yield) 2,150 2,300 1,650 2,450 Allowances, starting and basic rate limits (BRL) Change all main allowances, starting rate limit and BRL by 1 per cent 590 620 490 650 Change all main allowances, starting rate limit and BRL by 10 per cent Increase (cost) 5,600 5,900 4,600 6,200 Decrease (yield) 6,300 6,600 5,200 7,000 Working tax credit Change basic element by £100 240 240 240 240 Change 30 hour element by £100 170 170 170 170 Change additional element for couples and lone parents by £100 230 230 230 230 Child tax credit Change family element by £1009 570 560 570 560 Change child element by £10010 720 730 720 730 Common features Change first income threshold by £10011 70 70 70 70 Change second income threshold by £1,000 20 20 20 20 Corporation tax Raise starting rate by 1 percentage point12 15 15 — 10 Change small companies' rate by 1 percentage point12 200 210 — 170 Change main rate by 1 percentage point13 1,050 1,050 650 750 by successive administrations, as the then Minister of State at the Cabinet Office (Lord Falconer of Thoroton) confirmed in the House on 12 February 2001 (Official Report, col. 7).
The information sought by Lord Marlesford is reproduced in the accompanying table.
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Direct effects of illustrative tax changes1 Amounts: £ million Cost/yield 2004–05 (full year) 2005–062 (full year) 2004–05 (NABs) 2005–062 (NABs) Capital gains tax Increase annual exempt amount by £500 for individuals and £250 for trustees 15 15 — 15 Inheritance tax Change rate by 1 percentage point 80 80 35 70 Increase threshold by £5,000 70 70 30 60 Stamp duty land tax Change 1 per cent rate by 1 percentage point14 1,200 1,230 1,100 1,230 Change 4 per cent rate by 1 percentage point14 680 770 620 770 Change rate on leases by 1 percentage point14 190 210 170 210 Increase £250,000 threshold by £5,00014 40 60 30 60 National Insurance Contributions Rates: Change Class 1 employee main rate by 1 percentage point15 3,200 3,350 3,200 3,350 Change Class 1 employee additional rate by 1 percentage point16 680 740 680 740 Change Class 1 employer rate by 1 percentage point 4,050 4,300 4,050 4,300 Change Class 2 rate by £1 per week17 150 155 150 155 Change Class 4 main rate by 1 percentage point18, 19 315 330 315 330 Change Class 4 additional rate by 1 percentage point18, 19 170 180 170 180 Limits: Change employee entry threshold by £2 per week 240 250 240 250 Change employer threshold by £2 per week 285 300 285 300 Change lower profits limit by £104 per year (£2 per week) 20 20 20 20 Change upper profits limit by £520 per year (£10 per week) 15 20 15 20 Change upper earnings limit by £10 per week 130 135 130 135 1The estimates are rounded and, unless otherwise shown, the figures apply to both increases and decreases. The extent of rounding reflects the desire to avoid undue compounding of its effects when numbers are pro-rated, rather than the accuracy of the estimates. Changes are assumed to take effect from April 2004. 2 Assuming the changes in 2004–05 are carried through to 2005–06. 3 The figure for income tax changes include consequential effects on the yield of capital gains tax. 4 Including savings income taxable at the starting rate, but excluding dividend income. 5 Covering savings income (but not in the starting rate), and excluding dividends. This includes the consequential effects on the liability of higher-rate taxpayers. The lower rate of tax savings applies to income between the starting rate limit and the basic rate limit. 6 Excluding savings income taxed at the lower or starting rates or dividends. 7 Allowances for those aged 65–74 and aged 75 and over. 8 Allowances for those born before 6 April 1935. 9 Excluding family element, baby addition. 10 Includes increasing child elements for those receiving Income Support and income-base Jobseekers' Allowance in 2004–05. By 2005–06 these families will have migrated on to the Child Tax Credit. 11 Includes increases to both the first income threshold and the first threshold for those entitled to Child Tax Credit only. 12 Estimates take into account the effect of the non-corporate distributions rate of corporation tax, which reduces the amount of taxable profit that is affected by a change to the starting and small companies' rates. 13 Estimates assume rate changes apply to profits from 1 April 2004. 14 Estimates include both residential and commercial transactions. 15 Rate charged between the entry threshold and the upper earnings limit. 16 Rate charged above the upper earnings limit. 17 Flat rate contributions payable by the self-employed with earnings above the small earnings exception rate. 18 Profit related contributions payable by the self-employed. 19 Rate charged the lower and upper profits limits. 20 Rate charged above the upper profits limits. Notes:
1. Table T1.6 is a "ready reckoner" showing the estimated effects of various illustrative tax changes on tax receipts in 2004–05 and 2005–06. The tax changes are assumed to take effect from April 2004. The estimates depend on forecasts of economic variables such as prices, earnings and interest rates. They are consistent with the March 2004 Budget. The estimates only cover the direct effects of tax changes on tax receipts. In practice changes to the tax regime will affect economic variables which in turn would have further effects on tax receipts.
2. The figures are shown on a full year accrual basis and a national accounts basis (NAB). The national accounts basis aims to recognise tax as the tax liability accrues, irrespective of when the tax is received by the Exchequer. However, some taxes are scored on a receipts basis, principally reflecting the difficulty in assessing the period to which the tax liability relates. Examples of such taxes are corporation tax, self-assessment income tax, inheritance tax and capital gains tax. This approach is consistent with other Government publications.
90WA91WA3. The table is designed to be used as a ready reckoner. The effects of the changes can be scaled up or down over a reasonably wide range. Thus a reduction of 2p in a tax rate will cost roughly twice as much as a reduction of 1p. However, the extra cost of increasing an income tax allowance or rate limit by more than the amount shown falls as the allowance or rate limit rises. Therefore estimates are given for different percentage changes, and for reductions as well as increases, for the main income tax allowances and limits.
4. The total cost or yield of a group of changes can be broadly assessed by adding together the estimated revenue effects of each change. However, if income tax allowances are increased substantially then the cost of a subsequent cut in tax rates will be reduced. In such cases the revenue effects of combining components from the ready reckoner can only be taken as a rough guide.