Income Tax

Oral Answers to Questions — Treasury – in the House of Commons on 11th December 2018.

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Photo of Antoinette Sandbach Antoinette Sandbach Conservative, Eddisbury

What progress he has made on reducing the amount of income tax that people pay.

Photo of Philip Hammond Philip Hammond The Chancellor of the Exchequer

The Government are committed to ensuring that working people can keep more of what they earn. At Budget 2018, I announced that the Government will increase the personal allowance to £12,500 and the higher rate threshold to £50,000 from April 2019, delivering on our manifesto promise one year early. This is a tax cut for 32 million people that will save a typical basic rate taxpayer a further £130 a year in tax. In the north-west and Merseyside, 196,000 of the lowest paid will have been taken out of income tax since 2015, leaving more of their hard-earned money in their pockets. The typical basic rate taxpayer across the UK will pay £1,205 less in 2019 than he or she did in 2010.

Photo of Antoinette Sandbach Antoinette Sandbach Conservative, Eddisbury

Some 37,000 constituents in Eddisbury have had an income tax cut and 738 pay no tax at all, but many will pay another tax on their income, which is national insurance. What steps is the Chancellor taking to reduce the burden of national insurance on the lowest paid?

Photo of Philip Hammond Philip Hammond The Chancellor of the Exchequer

The Government do consider national insurance contributions and income tax together to ensure an overall progressive tax system in which those earning the most pay the most. However, when we are looking at national insurance thresholds, it is important for us to remember that national insurance payments provide access to social security benefits: they build individuals’ entitlements to contributory benefits, including the state pension, as well as helping to fund the NHS. It is probably worth my mentioning that on average, in 2019-20, households in the lowest income decile will receive over £4 in public spending for every £1 they pay in tax.

Photo of Gregory Campbell Gregory Campbell Shadow DUP Spokesperson (International Development), Shadow DUP Spokesperson (Cabinet Office)

Will the Chancellor bear the whole issue of national insurance in mind, both now and when it comes to his Budget, in that people on low wages, who understand they will begin to pay national insurance much earlier than they pay tax, should retain more of their hard-earned money in net terms?

Photo of Philip Hammond Philip Hammond The Chancellor of the Exchequer

I hear the hon. Gentleman’s point, but I repeat what I have just said. We have to remember that people coming into national insurance at a lower rate also means people coming into entitlement to contributory benefits at that rate. We have a contributory principle in our benefits system, and national insurance is the key to it.

Photo of Richard Bacon Richard Bacon Conservative, South Norfolk

When income tax was first introduced, it was supposed to be temporary. Can the Chancellor of the Exchequer update us on his plans finally to get rid of this tax, or will it, like the backstop, be with us for the next 200 years?

Photo of Philip Hammond Philip Hammond The Chancellor of the Exchequer

When I was in Brussels the other day, I was reliably informed that the kingdom of Belgium was originally intended to be a temporary construct, but it still seems to be with us. The world has moved on since the Napoleonic wars, as my hon. Friend may or may not celebrate, and I have to tell him that the Government have no plans to abolish income tax.

Photo of Stewart McDonald Stewart McDonald Shadow SNP Spokesperson (Defence)

The lowest paid members of the armed forces stationed in Scotland pay less in tax than their counterparts elsewhere in the UK, so why will the Chancellor not stand up for the lowest paid members of the armed forces, either by giving them a tax cut to match their counterparts in Scotland or by giving them a proper pay rise?

Photo of Philip Hammond Philip Hammond The Chancellor of the Exchequer

My understanding is that my right hon. Friend the Secretary of State for Defence has put in place special measures to ensure that those members of the armed forces who are disadvantaged by Scotland’s higher income tax rates are compensated, in order to avoid a situation where they regard postings to Scotland as hardship postings.