The various personal allowances reduce the burden of income tax at all levels but give special help to the very poor by relieving them altogether of all liability to pay income tax. I therefore propose to increase the single person's allowance and the wife's earned income allowance by £70 to £805 and to raise the married allowance by £140 to £1,225.
I am proposing a substantially larger increase in the married allowance so as to provide the family man with special help during the transition to the child benefit scheme. It would not be appropriate to adjust child tax allowances again as I did last year. Hon. Members have already been given details of reductions being made in child tax allowances this year as the first stage in their replacement by child benefit. The effect on family income of the reduction in the allowances will in general be more than offset by the child benefits which mothers will get. But I am conscious of the need to ease the effect of this change on the father's pay packet. That is why I am proposing a substantially larger increase in the married allowance.
I propose also to raise the additional personal allowance by £70 to £420. This will ensure that, as in previous years, the allowance for one-parent families is kept in line with that for two-parent families. I propose to increase the age allowances for those over 65, so that they become £1,080 for the single and £1,695 for the married.
These increases in personal allowances will give relief at all income levels. For those over 65 the resulting threshold will remain above the level of their retirement pensions and they will continue to be able to earn some supplement to their pensions without paying additional tax. As a result of these increases in personal allowances, 845,000 people who would otherwise have been paying income tax next year will not now do so.