Financial Resolutions, 1978: Financial Statement, Budget, 1978. - TAXATION POLICY Personal income tax Personal allowances
I now come to my proposals for changes in the personal income tax. I have already indicated that the increase in the main personal income tax allowances proposed in the manifesto would be sufficient to improve real disposable incomes significantly, taken in conjunction with the Government target of a wage increase of about 5 per cent. I propose to increase the single allowance by £200, from £665 to £865, and to increase the married allowance by £630, from £1,100 to £1,730.
At its new rate of £1,730, the married allowance will be double the single allowance. The existing allowance of £230 for working wives will be maintained. These measures should be of particular benefit to married couples. Combined with a pay increase of 5 per cent, this would give an increase in weekly after-tax income of £6.52 or 11 per cent for a married man with two children, who is on average industrial earnings of about £70 a week.
The abolition of rates on domestic dwellings and the abolition of motor vehicle duties for all but large cars will also mean a good deal more cash in the pocket for the average family in 1978. Savings in motor vehicle duties for a modest family saloon should work out at about £1 a week. Rates savings will, of course, depend on the type of accommodation which a family has. The average savings here should be about £2 a week for a local authority tenant: for a family purchasing a three-bedroomed semi-detached house in the Dublin area the saving could be £4 a week or more.
All in all, therefore, the average family can expect to be at least £9 to £10 a week better-off in terms of disposable income by virtue of these particular measures.
In line with the increase in the single allowance which I have mentioned, the personal allowance for widows and widowers will go up from the present level of £735 to £935 that is, an increase of £200.
I have never accepted the view that all pensioners should be automatically exempt from tax, regardless of their income. I feel that the best way to tackle the tax burden of pensioners is to increase the special age allowance available to persons aged 65 years or over, and this I propose to do. The existing age allowances of £45 for single or widowed persons and £145 for married persons are to be increased by £35 in each case, that is to £80 and £180 respectively. Taken in conjunction with the other increased allowances which I have announced, this will result in a significant improvement in the position of pensioners who are paying income tax.
The cost of all these increases in personal allowances will be £63.4 million this year.