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Investment Income (Disaggregation)

Volume 114: debated on Wednesday 8 April 1987

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asked the Chancellor of the Exchequer what is his estimate of the cost in 1987–88 of taking the investment income of husbands and wives separately, including occupational pensions.

I regret the delay in answering this question. The revenue cost would depend on the detailed tax rules and on any consequential behavioural effects such as the transfer of assets between spouses. If the only changes to the tax rules were to allow the existing wife's earned income allowance against both the wife's investment income and category B state retirement pension and for the wife to have her own tax rate bands for these sources of income, the direct revenue cost (making no allowance for behavioural effects) would be about £500 million at 1987–88 levels of income. This figure is based on projections from information recorded on the survey of personal incomes, which does not have complete coverage of investment income taxed at source, and could therefore be an underestimate. An occupational pension arising from the wife's employment is treated as the wife's earned income under the current rules and qualifies for the wife's earned income allowance.