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Income Tax: Tax Allowances

Volume 488: debated on Tuesday 3 March 2009

To ask the Chancellor of the Exchequer (1) if he will estimate the cost to the Exchequer of raising income tax personal allowances to provide for those earning no more than the national minimum wage to be exempt from income tax; (259675)

(2) by how much the personal allowance would need to be raised to take those working for 35 hours a week on the national minimum wage out of income tax liability; and what the cost of doing so would be in 2009-10.

The current hourly rate of national minimum wage can be found on the HM Revenue and customs website at:

http://www.hmrc.gov.uk/nmw/

The annual amount received by someone on the national minimum wage will depend on the weekly hours worked, and estimates of the cost of raising the income tax personal allowance to different levels can be approximated from table 1.6 'Direct effects of illustrative tax changes' on the HM Revenue and Customs website at:

http://www.hmrc.gov.uk/stats/tax_expenditures/table 1-6.pdf

The figures exclude any estimate of behavioural response.

To ask the Chancellor of the Exchequer what increase in the personal income tax allowance would be achieved at a cost of £8.6 billion in 2009-10; and how many people would be removed from any income tax liability as a result of such an increase. (260310)

Raising the personal allowance by £1,520 to £7,995 for 2009-10 would cost around £8.6 billion and take approximately 1.7 million people out of income tax. This estimate is based on the 2005-06 Survey of Personal Incomes projected forward using pre-Budget 2008 assumptions. It refers only to income tax, not National Insurance contributions, and excludes any estimate of behavioural response.