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Tax Reliefs And Allowances

Volume 124: debated on Friday 18 December 1987

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To ask the Chancellor of the Exchequer what would be the cost in 1987–88 and 1988–89 of restricting (a) personal allowances and (b) mortgage interest tax relief to the standard rate of tax only.

[holding answer 17 December 1987]: The direct revenue yield at 1987–88 levels of income of restricting personal allowances to the basic rate is estimated to be £810 million; the yield at 1988–89 levels of income, assuming indexation of the current income tax bands and allowances to 1988–89 levels as in table 4.1 of the 1987 Autumn Statement, is estimated to be £950 million. The estimates make no allowance for possible changes in taxpayers' behaviour.

The direct revenue yield in a full year at 1987–88 levels from restricting mortgage interest relief to the basic rate is estimated to be £330 million. This estimate makes no allowance for the effect of any consequential changes to the distribution of outstanding mortgages. It would be premature to provide estimates of the direct revenue yield at 1988–89 levels since this will depend on the mortgage interest rate and the level of mortgages outstanding in that year.

To ask the Chancellor of the Exchequer if he will publish in the Official Report figures relating to tax reliefs and allowances on the same basis as in his reply

Reductions in income tax liabilities in 1987–88 compared with the indexed 1978–79 tax regime
Upper 50 per cent.1Lower 50 per cent.1
AmountAverage per tax unit2AmountAverage per tax unit2
£ million£ per year£ million£ per year
Increase in personal allowances2,5002401,470140
Abolition of reduced rate band-1,720-170-1,130-110
Decrease in basic rate6,1906001,790170
Increase in higher rate threshold40040
Changes in higher rate thresholds80080
Abolition of higher rates above 60 per cent.59060
Abolition of Investment Income Surcharge81080202
Total9,5709202,150200
Notes: Source of income tax reduction(+)/increase(-).
In the table, the effect of each change has been calculated on the assumption that each of the previous changes has already been made.
1 Based on 20·9 million single people and married couples expected to pay tax in 1987–88 and excluding a further 900,000 who would pay tax under the revalorised 1978–79 regime. All information is in terms of tax units i.e. married couples are counted as one and their incomes combined.
2 By reference to the numbers paying tax in 1987–88.