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answer text |
<p>The estimated Exchequer impact of freezing the personal allowance at £12,000 and
freezing the higher-rate threshold at £50,000 in 2021-22 and 2022-23 is:</p><p> </p><table><tbody><tr><td><p>£<ins
class="ministerial">m</ins> <del class="ministerial">bn</del></p></td><td><p>2021-22</p></td><td><p>2022-23</p></td></tr><tr><td><p>Exchequer
Impact of a Freeze of the PA at £12,000 and the HRT at £50,000</p></td><td><p>1,800</p></td><td><p>3,900</p></td></tr><tr><td
colspan="3"><p>Figures have been rounded to the nearest £100 million. The The impact
is shown on a National Accounts basis consistent with the presentation in table 2.1
of Budget documents</p></td></tr></tbody></table><p> </p><p>The government remains
committed to increasing the PA to £12,500 by 2020-21. The estimated Exchequer impact
of freezing the personal allowance at £12,500 and freezing the higher-rate threshold
at £50,000 in 2021-22 and 2022-23 is:</p><p> </p><table><tbody><tr><td><p>£<ins class="ministerial">m</ins><del
class="ministerial">bn</del></p></td><td><p>2021-22</p></td><td><p>2022-23</p></td></tr><tr><td><p>Exchequer
Impact of a Freeze of the PA at £12,500 and the HRT at £50,000</p></td><td><p>1,800</p></td><td><p>4,000</p></td></tr><tr><td
colspan="3"><p>Figures have been rounded to the nearest £100 million. Therefore the
modelling simulation above has been repeated with the PA set to £12,500 in 2020-21,
frozen thereafter (the HRT was as in the £12,000 scenario above).</p></td></tr></tbody></table><p>
</p><p>Both of these estimates are sensitive to any changes in the projected economic
determinants used, and modelling assumptions, and are therefore subject to revision.</p><p>
</p><p><del class="ministerial">[</del>To answer this question a number of assumptions
have been made as set out below. These estimates are consistent with the methodology
used to estimate the impact of policy changes to Income Tax and National Insurance
Contributions (NICs).</p><p> </p><p>The question implies that the Personal Allowance
(PA) and Higher Rate Threshold (HRT) would be at the stated levels in 2020-21 in order
that they be frozen at those levels (rather than indexed with Consumer Price Index
(CPI) indexation as is the convention) for the years after that.</p><p> </p><p>The
Exchequer impact of meeting the thresholds in 2020-21 has is not included in these
figures.</p><p> </p><p>The estimated impact from freezing the PA and HRT has been
modelled using the 2014-15 Survey of Personal Incomes projected using assumptions
from the Office of Budget Responsibility’s November 2017 economic and fiscal outlook.
The costs set out below include assumptions on the likely behavioral responses of
affected taxpayers, which is in line with previous similar costings agreed with the
OBR.</p><p> </p><p>The costing include the impact on NICs, as the Upper Earnings Limit
and Upper Profits Limit are aligned to the Higher Rate Threshold which has been frozen
at £50,000 for this policy.</p><p> </p><p>The simulation assumes the HRT freeze does
not apply in Scotland where this threshold is devolved. Therefore the Scottish Basic
Rate Limit (BRL) is amended to maintain the Scottish HRT at the current projected
levels after any changes to the PA. The simulation includes an estimate for the change
in the Scottish block grant adjustment under this policy change scenario.</p><p> </p>
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