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Income Tax

Volume 474: debated on Tuesday 1 April 2008

To ask the Chancellor of the Exchequer what estimate he has made of the net effect on income tax receipts of imposing a 50 per cent. rate on those earning £100,000 and over per annum and raising the lower threshold for payment of income tax and national insurance contributions to £12,000 per annum. (196529)

[holding answer 25 March 2008]: The net effect of introducing a new higher rate band at 50 per cent. for incomes above £100,000 and raising the personal allowance to £12,000 would be a cost of around £65 billion for 2008-09. This figure excludes any estimate of behavioural response to the changes which could be significant given the scale of the changes, and which might eliminate a large proportion of the yield from any new higher rate band.

The estimates cover both income tax and national insurance contributions but assume the higher dividend rate remains at 32.5 per cent. and that the basic rate limit is unchanged.

The income tax information is based upon the 2005-06 Survey of Personal Incomes and 2008 Budget assumptions.