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Tax Allowances And Reliefs

Volume 201: debated on Friday 20 December 1991

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To ask the Chancellor of the Exchequer what would be (a) the first year and (b) the full-year revenue effect if all tax allowances and reliefs except the single person's allowance were restricted to the basic rate (i) in 1991–92 and (ii) in 1992–93, in Great Britain and Northern Ireland, giving the revenue from each separately and the total.

It is estimated that at 1991–92 levels of income the yield, in a full year, from restricting all tax allowances and reliefs—except the personal allowance—to the basic rate of tax would be about £900 million. The corresponding provisional figure for 1992–93 is £950 million under the illustrative assumption of 4 per cent. increases in allowances and the basic rate limit from table 4·2 of the autumn statement 1991.The combined effect of restricting these allowances and reliefs to the basic rate is greater than the sum of the effects of restricting each component separately. This is due to the cumulative effect of bringing more people into higher rate tax. For 1991–92 the estimated yields from the main components individually are:

£ million
All allowances except the personal allowance300
Occupational pension contributions250
Personal pension contributions150
The effect on receipts in the first year would depend on the administrative arrangements for the restrictions.It is not possible to provide a detailed breakdown for the components in respect of 1992–93 with acceptable accuracy.