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Houses (Financial Statistics)

Volume 982: debated on Wednesday 16 April 1980

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asked the Chancellor of the Exchequer what are (a) the average values of a typical three-bedroom house purchased through a building society in 1979 in the North-West and Greater London, respectively, (b) the average mortgage taken and the amount of interest payable, (c) the average, required or typical, income of the mortgagor, (d) the net annual value in terms of schedule A and (e) the estimated gain or loss to the mortgagor if schedule A tax were to be reintroduced

NotesNorthwestGreater London
(i) Average dwelling price for new purchases(1)16,90225,793
(ii) Average advance(1)10,45114,489
(iii) Annual interest payable on new mortgages(2)1,2281,702
(iv) Average annual income (1)(3)6,4208,089
(v) Net annual value (NAV)(4)168282
(vi) Gross equivalent of NAV234370
(vii) Income tax payable after allowing mortgage interest relief(5)9761,334
(viii) Income tax payable with no mortgage interest relief but 24.6p rate of tax(6)1,1331,543
(ix) Schedule A tax on 80% of GRV at 24.6p tax rate(7)4673
(x) Loss (vii-viii-ix)-4,203-282
1. The figure at i, ii, and iv are taken from the Department of the Environment's annual 5 per cent. sample survey of building society mortgages and cover all types of dwelling.
2. The interest payable at iii is a full year's interest at 11¾ per cent, the recommended rate in force for the calendar year 1979 (except for new mortgages taken out in the last month of the year).
3. The income figure at iv includes some second incomes.
4. The net annual value is the average net rateable value for all dwellings for the areas shown in the valuation list at 1 April 1979 regardless of any retrospective amendments made later. It includes dwellings owned by local authorities and public corporations. The gross annual values are those appropriate to the average net annual values shown.
5. The tax calculation is that appropriate for a married man with no tax allowances apart from the married allowance and mortgage interest relief. It is calculated on the income and interest for calendar year 1979 at 1979–80 tax rates and allowances.
6. The reply given on 13 March 1980 (Official Report, Vol 980, Cols 539–40) stated that a reduction of about 3¾p in the basic rate of income tax would cost £1,850 million at 1979–80 income levels, the estimated total net yield from a "Schedule A" tax at 30p basic rate on the assumptions given.
The abolition of tax relief on mortgage interest would by itself yield about £1,450 million, the equivalent of a reduction of nearly 3p in the basic rate of income tax in 1979–80.
If these two measures were introduced concurrently, however, the tax yield from Schedule A tax would be reduced giving a total possible reduction in the basic rate and lower rate of tax to 24.6p
7. As in the previous reply (Official Report, Vol 980, Cols 539–40) a deduction of only 20 per cent. of the gross rateable value shown has been allowed for repairs and renewals in arriving at the Schedule A tax figures.