- ANNEX B: EFFECTS OF DIRECT TAX
AND BENEFIT CHANGES IN THE 2008 PRE-BUDGET REPORT AND BUDGET 2007
- This annex shows the combined effects
of the Budget 2007 direct tax and benefit changes with the 2008
Pre-Budget Report personal tax measures (including 13 May increase
to personal allowances).
- The distributional analysis in this
annex is presented on a household basis, as the effects
of Budget 2007 can only be seen on this basis, since it included
significant increases in tax credits, which are paid to households
according to household income. So the combined effect of Budget
2007 and the 2008 Pre-Budget Report can only be shown by household.
- The annex shows the reduction in the
number of households paying more net tax as a result of the removal
of the 10p tax rate. In 2009-10, the number of these households
falls from 5.3 million originally to 600,000. In 2011-12, when
all the 2008 Pre-Budget Report measures have come into place,
this number falls further, to 500,000.
- Household analysis of the Budget
2007 and 2008 Pre-Budget Report personal tax measures[5]
- Table B1 below shows the effects of
the 2008 Pre-Budget Report measures combined with the Budget 2007
personal tax changes in 2009-10, compared to April 2007, before
the Budget 2007 measures took effect.
- This shows that:
- - 21 million households gain next
year by an average of almost £6 a week from the direct tax
and benefit changes in Budget 2007, May 2008 and the 2008 Pre-Budget
Report
- - the number of households paying
more net tax as a result of the Budget 2007 changes falls from
5.3 million originally to 0.6 million in 2009-10 once the Pre-Budget
Report measures have taken effect;
- - no additional households pay
more net tax as a result of the 2008 Pre-Budget Report measures
in 2009-10. All households gain relative to their position in
April 2008 (i.e. just looking at the 2008 Pre-Budget Report measures
and 13 May increase in the personal allowance).
- Table B1: effects of Budget
2007 and 2008 Pre-Budget Report measures in 2009-10 compared to
April 2007 by household income[6]
| 2009-10, effects of Budget 2007 and Pre-Budget Report 2008
|
| Income decile | Gain (m)
| Average gain (£p/w)
| No change | Lose (m)
| of which lose from Budget 2007 (m)
| Average loss (£p/w)
|
| Bottom
| 1.0 |
5.7 | 1.5
| 0.1 |
0.1 |
-0.8 |
| 2 | 1.5
| 6.0 |
1.0 | 0.1
| 0.1
| -0.7 |
| 3 | 1.8
| 4.8 |
0.7 | 0.1
| 0.1
| -0.9 |
| 4 | 1.8
| 4.1 |
0.6 | 0.1
| 0.1
| -0.7 |
| 5 | 2.1
| 4.0 |
0.4 | 0.1
| 0.1
| -0.7 |
| 6 | 2.4
| 4.6 |
0.2 | -
| - |
- |
| 7 | 2.5
| 5.4 |
0.1 | -
| - |
- |
| 8 | 2.6
| 6.7 |
- | -
| - |
- |
| 9 | 2.6
| 8.5 |
- | -
| - |
- |
| Top | 2.6
| 7.3 |
- | -
| - |
- |
| All | 21.1
| 5.8
| 4.6
| 0.6
| 0.6
| -0.8
|
- Table B2 below shows the effects of
the 2008 Pre-Budget Report measures combined with the Budget 2007
personal tax changes in 2011-12, when all measures have been brought
in, compared to April 2007, before the Budget 2007 measures took
effect.
- This shows that:
- - around 20 million households
continue to gain from the full set of direct tax and benefit reforms
brought in since Budget 2007, on average by over £5.50 a
week;
- - in 2011-12, the number of households
paying more net tax from the Budget 2007 changes has reduced even
further, to 0.5 million, as a result of the permanent £120
increase in the personal allowance, the increase in the NICs primary
threshold, and holding tax and NICs thresholds constant in 2010-11
despite forecast negative RPI in September 2009; and
- - in 2011-12, 1.5 million households
in the top half of the income distribution pay more net tax as
a result of the 2008 Pre-Budget Report personal tax measures to
put the public finances on a path to achieve cyclically-adjusted
current balance and a declining debt to GDP ratio by 2015-16.
These are households that have the greatest ability to manage
this additional cost, with most in the top 10% of incomes.
- Table B2: effects of Budget
2007 and 2008 Pre-Budget Report measures in 2011-12 compared to
April 2007 by household income
| 2011-12, effects of Budget 2007, 13 May and Pre-Budget Report 2008
|
| Income decile | Gain (m)
| Average gain (£p/w)
| No change | Lose (m)
| of which lose from Budget 2007 (m)
| Average loss (£p/w)
|
| Bottom | 1.1
| 5.7 |
1.5 | 0.1
| - |
-0.8 |
| 2 | 1.6
| 6.1 |
1.0 | 0.1
| 0.1
| -0.8 |
| 3 | 1.9
| 4.9 |
0.7 | 0.1
| 0.1
| -0.7 |
| 4 | 1.9
| 4.3 |
0.6 | 0.1
| 0.1
| -0.6 |
| 5 | 2.2
| 4.2 |
0.4 | 0.1
| - |
-0.7 |
| 6 | 2.4
| 4.7 |
0.2 | 0.1
| - |
-1.2 |
| 7 | 2.4
| 5.4 |
0.1 | 0.1
| - |
-1.4 |
| 8 | 2.4
| 6.6 |
0.1 | 0.2
| - |
-1.9 |
| 9 | 2.3
| 7.7 |
- | 0.3
| - |
-3.7 |
| Top | 1.5
| 6.5 |
- | 1.1
| 0.1
| -36.9 |
| All | 19.7
| 5.6
| 4.6
| 2.0
| 0.5
| -20.9
|
Analysis by household type
This section sets out the information
shown above broken down by household types instead of income deciles.
It is based on the same methodology as above.
Table B3 below sets out the results in
table B1 by household type. It shows that:
- the 21 million households gaining
are distributed across all household types. Couples of working
age and single non-pensioners are most likely to gain from the
changes to income tax and NICs.
- all lone parents gain from the combined
set of measures from Budget 2007 onwards
- most pensioners gain from the measures,
with very few losing in April 2009
- the smaller remaining number of
households that pay more net tax from the removal of the 10p tax
rate are mainly of working age without children
Table B3: effects of Budget
2007 reforms, 13 May announcement and 2008 Pre-Budget Report measures
in 2009-10 by household type (millions of households)
| 2009-10, effects of Budget 2007, 13 May and PBR 2008
| |
| Income decile | Gain (m)
| Average gain (£p/w)
| No change | Lose (m)
| of which lose from Budget 2007 (m)
| Average loss (£p/w)
|
| Single non-pensioner |
2.8 | 4.1
| 1.1 |
0.2 | 0.2
| -0.7 |
| Couple without children
| 4.2 |
6.3 | 0.3
| 0.2 |
0.2 |
-0.8 |
| Couple with children |
4.4 | 7.2
| - |
- | -
| -- |
| Lone parent | 1.6
| 7.0 |
0.0 | 0.0
| 0.0
| 0.0 |
| Single pensioner | 2.0
| 2.2 |
1.9 | 0.1
| 0.1
| -0.7 |
| Couple pensioner | 1.9
| 4.0 |
0.9 | -
| - |
- |
| Multiple tax units |
4.2 | 7.1
| 0.4 |
0.2 | 0.2
| -0.9 |
| All | 21.1
| 5.8
| 4.6
| 0.6
| 0.6
| -0.8
|
Looking at 2011-12, table B4 below sets
out the results in table B2 by household type. It shows that:
- households continue to gain across
all household types. Couples of working age and single non-pensioners
are still most likely to gain from the changes to income tax and
NICs.
- almost all lone parents continue
to gain from the combined set of measures from Budget 2007 onwards
- most pensioners gain from the measures,
still with very few losing in April 2011
As shown in Annex A, households paying
more net tax from the 2008 Pre-Budget Report measures on income
tax and NICs are in working households with someone earning over
£40,000
Table B4: effects of
Budget 2007 reforms, 13 May announcement and 2008 Pre-Budget Report
measures in 2011-12 by household type (millions of households)
| 2011-12, effects of Budget 2007, 13 May and PBR 2008
| |
| Income decile | Gain (m)
| Average gain (£p/w)
| No change | Lose (m)
| of which lose from Budget 2007 (m)
| Average loss (£p/w)
|
| Single non-pensioner |
2.6 | 3.8
| 1.1 |
0.4 | 0.1
| -8.9 |
| Couple without children
| 3.9 |
5.7 | 0.3
| 0.5 |
0.1 |
-28.4 |
| Couple with children |
3.8 | 7.2
| - |
0.7 | 0.1
| -25.3 |
| Lone parent | 1.6
| 7.2 |
- | 0.0
| 0.0
| 0.0 |
| Single pensioner | 2.0
| 2.2 |
1.9 | 0.1
| 0.1
| -4.3 |
| Couple pensioner | 1.9
| 3.9 |
0.9 | 0.1
| - |
- |
| Multiple tax units |
4.1 | 7.0
| 0.3 |
0.3 | 0.1
| -22.1 |
| All | 19.7
| 5.6
| 4.6
| 2.0
| 0.5
| -20.9
|
5 Household level analysis is produced by HM Treasury
using its tax and benefit micro-simulation model. This allows
analysis of the effects of Budget and Pre-Budget Report measures
on the population as a whole. The model uses survey data from
the Expenditure and Food Survey (EFS) from 2004-05 to 2006-07,
uprated to 2008-09. Back
6
N.B. Figures may not sum due to rounding. Total numbers are rounded
to the nearest 100,000.
'-' signifies 50,000 or fewer.
Applies to all tables in Annex B. Back
|
