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Tax Reductions

Volume 983: debated on Thursday 24 April 1980

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asked the Chancellor of the Exchequer if he will list the percentage of net tax reductions to the poorest 10 per cent. of taxpayers and the richest 7 per cent. resulting from his 1980 Budget.

Tax in 1980–81
Income in 1979–80Tax in 1979–80Income in 1980–81At 1979–80 rates and allowancesAt proposed rates and allowancesIncrease in tax at 1979–80 rates and allowancesProposed reduction in taxPercentage increase on 1979–80 in post-tax income at proposed rates and allowances
Those whose taxable income in 1979–80 was as low as the lowest incomes shown were likely to be juveniles or persons who worked for only part of the year, together with elderly persons who benefited in addition from the age allowance which is not included in the calculations above.Taking the distribution of tax units—counting married couples as one—who would have paid tax in 1980–81 if tax allowances had remained unchanged, the bottom 10 per cent. of the distribution including the groups listed above, would have paid about 1 per cent. of the total tax bill for 1980–81 if rates and allowances had been unchanged. The Budget proposals are estimated to reduce this percentage slightly and about 5 per cent. of the main Budget income tax reductions of £1,539 million goes to this group.If tax allowances had remained unchanged in 1980–81, the top 7 per cent. of the distribution of taxpayers would have paid about 28 per cent. of the total income tax bill and this proportion is estimated to increase slightly with the rates and allowances proposed in the Budget, even though this group benefit

[pursuant to his reply, 17 April 1980, c. 777]: The income tax reductions proposed in the Budget Statement go some way to offsetting the tax increases which have arisen at different income levels in the last year, as a result of inflation. The greatest reductions therefore necessarily go to those who have suffered the greatest increases. This is illustrated for those at the top and bottom of the income distribution in the table below, where the calculations are for a single person whose pre-tax income has increased in line with the price indexation percentage of 17·82 per cent:from about 24 per cent. of the £1,539 million reductions.