Inland Revenue 4

9 November 1999





RISE IN INCOME TAX PERSONAL ALLOWANCE, WORKING FAMILIES' TAX CREDIT AND DISABLED PERSON'S TAX CREDIT

The Chancellor today announced that the income tax personal allowance would be increased in line with indexation to £4,385 from April 2000. This means that all taxpayers will be able to have income of at least £84 a week in the tax year 2000-01 before they have to pay any income tax. Other changes to income tax rates and allowances will be announced in the Budget in the usual way. The Government has already announced a cut in the basic rate of tax by a penny, to 22p, from next April, to be legislated for in the 2000 Finance Bill.

As part of a package of National Insurance reform designed to improve work incentives for employees and reduce burdens on employers, the starting point for employers' National Insurance contributions (NICs) has been aligned with the income tax personal allowance since April this year. This means that the starting point for employers' NICs in 2000-01 will also be £84 a week. A statement covering NICs changes will be made by the Paymaster General shortly.

The Chancellor also announced that Working Families' Tax Credit (WFTC) and Disabled Person's Tax Credit (DPTC) rates and thresholds would be increased by 1.6 per cent from April 2000. And, in line with a commitment made in his last Budget, the child credit for under-11s will be increased by an extra £1.10 from the same date. These increases will boost the incomes of 1.4 million low-income working families and disabled people.



DETAILS



The income tax personal allowance will rise by £50 in 2000-01, in line with the

increase in the Retail Prices Index for the year ending in September.

Changes to income tax rates and allowances are normally announced in the Budget

each year. However, the alignment of the income tax personal allowance and the

starting point for employers' NICs means that, in practice, the level of both now

needs to be announced in the Autumn, to give employers time to implement the

threshold.



WFTC and DPTC rates and thresholds will rise from April 2000 in line with the

increase in the Rossi index in the year to September. (The Rossi index is broadly

the Retail Prices Index, less certain housing costs.) In addition, from April 2000, the

under-11 child credit will rise by £1.10 over and above indexation, to align it with the

11 - 16 child credit. This will provide yet further help to families with young

children.

From April 2000 the WFTC and DPTC rates will be as attached.



These rates will provide a minimum income guarantee of £202 a week for a family

with one child in receipt of WFTC, £157 for a single person on DPTC and £234 for

a family with one child on DPTC. (These figures are based on one earner in

full-time work, receiving the national minimum wage of £3.60 an hour, and include

the effects of indexing the personal allowance).









NOTES FOR EDITORS

1. The announcement today confirms that the basic personal allowance will be increased next year in line with statutory indexation. Income tax allowances are uprated each year in line with statutory indexation unless legislation is passed to override its effects. Statutory indexation is based on changes to the Retail Prices Index in the year to September, so this early announcement does not affect the amount of the increase. A statutory instrument has been made today in the usual way, confirming that the effect of indexation on the basic personal allowance is to increase it to £4,385 for 2000-01.

2. WFTC and DPTC were introduced on 5 October 1999 and are administered by the Inland Revenue. Ministers decide whether to change the rates and thresholds each year. From April 2000, they will be increased in line with the Rossi index.





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Working Families' Tax Credit £
1999-00 2000-01
Basic credit 52.30 53.15
30 hours credit 11.05 11.25
Child credits
Under 11 19.85 21.25
11 ­ 16 20.90 21.25
16 ­ 18 25.95 26.35
Income threshold 90.00 91.45
Disabled Person's Tax Credit £
1999-00 2000-01
Basic credit ­ single 54.30 55.15
­ lone parent/couples 83.55 84.90
30 hours credit 11.05 11.25
Child credits
Under 11 19.85 21.25
11 ­ 16 20.90 21.25
16 ­ 18 25.95 26.35
Disabled child 21.90 22.25
Income threshold ­ single 70.00 71.10
­ lone parent/couple 90.00 91.45


Note: The 11-16 and 16-18 child credits are paid from the September following the 11th birthday and 16th birthday respectively.





 

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