Taxation: Income Tax

Lord Barnett
asked Her Majesty's Government:

How many taxpayers have gained from (a) the removal of the 10p tax band; and (b) the reduction of the base rate to 20p; and [HL3499]

How many single men and women are affected by the removal of the 10p tax band; and how much extra is expected to be paid on average by such persons; and [HL3500]

For how long single men and women will remain in the income band affected by the removal of the 10p tax band. [HL3501]

Lord Davies of Oldham
The removal of the 10p tax rate was part of a package of reforms announced in Budget 2007. The exact effect of the reforms will depend both on individual incomes, and on the circumstances of the household in which people live—for example, whether they have children, and their age.

In 2008-09 all 31 million taxpayers are affected by the removal of the 10p rate of income tax. Some 28 million of these taxpayers stand to gain from the cut in the basic rate of income tax to 20p.

The Chancellor announced on 13 May an increase in the individual personal tax allowance by £600 to £6,035 for this financial year, benefiting all basic-rate taxpayers under 65 and removing 600,000 low-income individuals from tax. Around 22 million basic-rate taxpayers will gain an additional £120 this year, fully compensating 80 per cent of households that lose from the Budget 2007 reforms, with the remainder seeing their loss at least halved.

The Government will set out their plans for future years in the 2008 Pre-Budget Report.