Taxation: Inflation

Treasury written question – answered on 13 July 2023.

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Photo of Julian Knight Julian Knight Independent, Solihull

To ask the Chancellor of the Exchequer, if he has made an assessment of the potential merits of adjusting (a) Income Tax rates and (b) Personal Allowances in line with inflation.

Photo of Victoria Atkins Victoria Atkins The Financial Secretary to the Treasury

The UK's Personal Allowance (PA) is high by international standards – one of the most generous in the OECD and the most generous in the G7. Thanks to the PA, around 30 per cent of individuals do not pay tax.

Due to the significant real term increases to the PA, it is estimated there will be over 3 million people taken out of tax by 2023-2024, compared to the threshold rising in line with inflation from 2010-2011.

The income tax higher rate threshold is still high enough to protect the vast majority of people from paying the higher rate of income tax. Around 80 per cent of taxpayers pay tax at the basic rate.

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