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Income Tax: Tax Allowances

Volume 506: debated on Monday 22 February 2010

To ask the Chancellor of the Exchequer what estimate he has made of the likely cost to the public purse of increasing the personal allowance by £2,000, limited to the basic rate of income tax, in respect of (a) all married couples and couples in civil partnerships, (b) all married couples and couples in civil partnerships with children under the age of (i) three and (ii) six and (c) all those aged 65 years and over in each fiscal year from 2010-11 to 2013-14. (313286)

[holding answer 28 January 2010]: Due to the complex nature of these questions the following estimates should be treated with caution. These estimates exclude any behavioural response to the change, which could be significant given the magnitude of the change. This has the additional implication of limiting reliable modelling of costs to 2010-11.

The estimated costs of increasing the personal allowance by £2,000 per person, limited to the basic rate of income tax, are:

(a) £5.9 billion for all married couples and civil partnerships;

(b) (i) £0.6 billion for all married couples and civil partnerships with children under the age of three;

(ii) £1.0 billion for all married couples and civil partnerships with children under the age of six.

These estimates have been calculated using HM Treasury's tax and benefit micro-simulation model using Family Resources Survey 2007-08 data.

The estimates of increasing the personal allowance for those aged 65 and over can be approximated from table 1.6 “Direct effects of illustrative tax changes” available at:

http://www.hmrc.gov.uk/stats/tax_expenditures/table1-6.pdf