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Tax Allowances

Volume 79: debated on Friday 17 May 1985

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asked the Chancellor of the Exchequer (1) by how much the value of income tax personal allowances has increased in real terms since 1979; how this amount has been distributed to each band of income taxpayers, both in total and in amount per taxpayer; and if he will make a statement;(2) which income tax allowances have been increased by more than the rate of inflation since 1979; what were the real increases in each case; and what estimate he has made of the redistributional effects of these changes.

Information is in the following table:

Percentage increase in real terms*
Married man's allowance21
Single person's and wife's earned income allowance20
Additional personal allowance22
Married age allowance10
Single age allowance11
Blind person's allowance7
* Compared with movement in the retail prices index (RPI) between 1978–79 and 1985–86, assuming an increase of 5½ per cent. in the RPI between 1984–85 and 1985–86.
Reductions in income tax in 1985–86 compared with 1978–79 indexed tax regime
Range of total income in 1985–86 £Reduction in tax due to allowance changes £m.Tax units * millionAverage reduction per tax unit*Reduction as percentage of average income in the range
Under 5,0004403·9†952·6
5,000–10,0001,1508·41351·8
10,000–15,0008404·61801·5
15,000–20,0003601·82001·2
20,000–30,0002301·02401·0
30,000–50,000800·32750·7
Over 50,000300·093300·4
Total3,13020·11501·5
* Counting married couples as one.
† By reference to the estimated numbers of tax units who would be liable to pay tax under the indexed 1978–79 regime; this number is some 850,000 greater than the numbers paying tax in 1985–86 under the Budget proposals.