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Taxation: Personal Allowance

Volume 718: debated on Monday 8 March 2010

Question

Asked by

To ask Her Majesty's Government what is their most recent estimate of (a) the cost, and (b) the total financial effects by income decile, of raising pensioners' personal allowances by £2,000 for each of the next five years. [HL2265]

The approximate cost of increasing age-related personal allowances for people aged 65 and over by £2,000 for 2010-11 and applying statutory uprating in subsequent years can be extrapolated from Table 1.6 “Direct effects of illustrative tax changes”, available at: http://www.hmrc.gov.uk/stats/tax_expenditures/table1-6.xls

The estimates in Table 1.6 are based on the 2009 Pre- Budget Report forecast and the relevant section is shown below.

Extract from Table 1.6 Direct effects of illustrative tax changes

£ million cost/yield

2010-11

2011-12

2012-13

Income tax Allowances and reliefs Change age-related personal allowances by £100

65

75

80

Information on the income tax effect for 2010-11 by income decile of all people aged 65 and over is shown in the table below. No one aged 65 and over with income below the levels of age-related personal allowances, or above the income level at which the age-related allowances are reduced to the basic personal allowance for those aged below 65, would benefit.

Decile

Proportion of cost (%)

Mean (£)

Bottom

0

0

2nd

0

0

3rd

0

0

4th

0

0

5th

0

0

6th

1

10

7th

23

285

8th

30

380

9th

31

400

Top

15

190