In the circumstances, I must turn to Income Tax. Since 1945, Income Tax reliefs have been given by my predecessors which amount in all to more than £650 million. This figure represents the cost at the time the reliefs were given, but with the steady rise in national income which has occurred since then, they are today, on current income levels, worth about £1,000 million a year. With great regret I now feel bound to take back some small part of this relief. I want to do this, however, in a manner which favours those with greater family responsibilities and who might otherwise suffer most hardship.
I propose to increase the three rates of Income Tax by 6d. in the £, but to combine this with an increase of £10 each in the married persons' allowance and in the child allowance. The 2s. 6d. rate chargeable on the first £50 of taxable income will thus become 3s., the 5s. rate chargeable on the next £200 will become 5s. 6d., and the standard rate of 9s. will become 9s. 6d., while the married persons' allowance goes up from £180 to £190 and the child allowance from £60 to £70. The married allowance will thus be higher than immediately before the war, and the child allowance higher than it ever has been.
As a corollary of the increase in the standard rate I propose to reduce the top rate of surtax chargeable for 1951–52 on incomes over £20,000 to 10s. in the £, to prevent the combined top rate exceeding 19s. 6d. in the £. The net yield of these changes will be £73 million this year and £81 million in a full year.
Tables will be included in the Financial Statement showing the effect of the proposed changes on specimen incomes, but the Committee will be interested to know that, with these concessions, a married couple without children will pay no increase until the man's earnings exceed £7 2s. a week; in the case of the married couple with one child there is no increase until earnings exceed £11 4s. a week, and in the case of the married couple with two children the tax payable is not increased until earnings exceed £21 1s. a week. There are in fact some very slight reductions in tax liability for those with children at lower levels of income.
These changes will necessitate new P.A.Y.E. tables, and some recoding will also be necessary. The new tables will be in the hands of employers, and the recoding will be completed in time for deductions on the new scale to begin in the week commencing 25th May. In the first week in which the new tables are used, the under or over-deductions of tax in the previous seven weeks will be made good. In some cases this may mean a fairly substantial deduction of tax in that week, but it will not be unduly heavy in relation to the income involved.