To ask the Chancellor of the Exchequer what representations he has received seeking changes to reduce the effective 41·6 per cent. rate of tax for pensioners in receipt of age allowance.
[holding answer 25 March 1988]: There have been a number of representations on this subject.The situation to which my hon. Friend refers affects fewer than 2 per cent. of pensioner households, and has nothing whatever to do with the Budget changes. The age allowance has always been withdrawn progressively for taxpayers with incomes above a certain limit. This income limit is at its highest ever level in real terms, and the effective rate within the withdrawal band, at 41·6 per cent., is in fact at its lowest ever level. Those few taxpayers who have incomes within the withdrawal band will gain an extra £2·50 per week from the increase of £800 in the income limit proposed in the Budget, on top of the benefit they receive from the double indexation of the personal allowances and the basic rate cut.