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Income Tax

Volume 87: debated on Tuesday 26 November 1985

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asked the Chancellor of the Exchequer what would be the cost in the 1986–87 financial year of introducing a reduced rate band of 25p of income tax on (i) the first £750 of taxable income, (ii) the first £1,000 of taxable income and (iii) the first £1,500 of taxable income; and in each case, what would be the impact on the net income of a married man on half average earnings, three-quarters average earnings, average earnings, twice average earnings, five times average earnings and 10 times average earnings.

[pursuant to his reply, 22 November 1985, c. 333.]: The direct revenue costs are estimated to be about £850 million, £1,100 million, and £1,600 million, respectively, in a full year at 1986–87 levels of income, compared with the illustrative income tax regime resulting from 5½ per cent. indexation of 1985–86 allowances, thresholds and bands published in the autumn statement 1985. At each of the levels of gross income specified, the gain in net income from introduction of the reduced rate bands would be (i) 72p, (ii) 96p and (iii) £1·44 per week respectively. The estimates of Revenue cost assume that a separate lower rate band would also be available to a married couple against the wife's earned income; and that the thresholds for higher rates of tax would be unaffected by the introduction of the lower rate band.