Twice a year, HMRC publish a guide to the economy entitled, "Direct effects of illustrative tax changes".  This guide illustrates a number of "What if …" scenarios – the figures quoted are for the Tax Year 2018-19.



What would happen if

… the basic rate of Income Tax changed by 1p?
  • There would be £4050m more or less available in 2018/19
… the higher rate of Income Tax was raised by 1p?
  • It would generate an extra £840m for the taxman!
… the Personal Allowance changed by £100?
  • There would be a change of £585m.
Working Tax Credit decreased by £100?
  • It would give HMRC a yield of £285m
Child Tax Credit increased by £100?
  • It would cost the taxpayer £350m
Corporation Tax increased by 1 percentage point?
  • It would generate extra revenue of £2480m!
… the (Inheritance Tax) standard rate for estates left on death increased by 1 percentage point?
  • An extra £55m would be raised.
Class 1 employee main rate for National Insurance contributions increased by 1 percentage point?
  • The government would have and extra £4050m
Class 1 employer rate for National Insurance increased by 1 percentage point?
  • The extra revenue would be approximately £4950m
… the Standard Rate of VAT increased by 1 percentage point?
  • an extra £6000m would be available!
… the Chancellor increased duty on wine by just 1%?
  • An extra £40m would be generated!
duty on a litre of diesel increased by 1%?
  • There would be an extra £180m available to the Chancellor
Vehicle Excise Duty was increased by £5 for cars and £1 for motorbikes?
  • An additional £185m would be raised.
… there was a change of just 1% in the Climate Change Levy?
  • There would be a difference of around £10m.
Tobacco Duty on a packet of 20 cigarettes increased by 1%?
  • There would be an extra £10m for HMRC's coffers (pun intended).
Clearly, these changes may never happen, but this is a broad view of the sort of information the contending political parties look through when planning their election manifestos. In the coming weeks, it will be very interesting to see if the thorny subject of taxation rears its head!
You can see the full list, together with the exact explanation of how the figures were derived on the HMRC website here.

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Stuart Masters - Director at TFMC
Stuart Masters

Stuart has spent almost 20 years in accounting with a significant amount of time focused on Outsourcing and the provision of bookkeeping and financial management information for businesses.

Specialties: Bookkeeping, Management Accounts, Accounts Outsourcing, Business Development, Business Planning, Year End Accounts.