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Marginal Tax Rates

Volume 465: debated on Tuesday 23 October 2007

To ask the Chancellor of the Exchequer how many people will be subject to marginal deduction rates of over 50 per cent. under the 2008-09 tax and benefits system. (160299)

Table 5.2 of the 2007 pre-Budget report and Comprehensive Spending Review provides estimates of the number of families who may face marginal deduction rates above 60 per cent. under the 2008-09 tax and benefit system. The following table extends the published table to include families who may face marginal deduction rates above 50 per cent., though for technical reasons such estimates are less reliable than those routinely published in Budget and pre-Budget reports.

Distribution of marginal deduction rates for heads of families under the 2008-09 tax and benefit system

Marginal deduction rate

2008-09 system of taxes and benefits

Over 60 per cent.


Over 50 per cent.


The table shows marginal deduction rates for families where at least one person works 16 hours or more, and where increased earnings would lead to reduced tax credits, housing benefit or council tax benefit; all notes to the published table apply.

The estimates do not take account of the annual income disregard in tax credits, which in 2008-09 allows incomes to rise between one year and the next by up to £25,000 before tax credits begin to be withdrawn.

The number of families facing marginal deduction rates in excess of 70 per cent. has fallen by around half a million as a result of the Government’s reforms to the tax and benefit system.