Increasing the basic tax allowance could put more cash in your pocket
In Northern Ireland there are nearly 747,000 people who pay income tax.
According to the latest statistics, payment of income tax in Northern Ireland raised £2,660m — or nearly £3,560 per taxpayer.
The comparable UK average income tax per taxpayer was just over £5,010, meaning that the Northern Ireland average was only just over 70% of that for the UK.
The Budget on Wednesday will attract the interest of all taxpayers, some fearing increases in tax rates on higher incomes or lower allowances (particularly that which would affect child benefit).
For others, there is an expectation that more people on lower levels of income will escape income tax if the Chancellor has decided to raise the basic allowances to reduce their tax bill.
In Westminster there is considerable debate about the merits of reducing the top rate of tax — 50% — paid by people on incomes of over £150,000.
In Northern Ireland there are estimated to be only about 4,000 people in this high income category — less than one in 190 of all taxpayers.
On Wednesday over 500,000 Northern Ireland taxpayers likely to be affected will listen a lot more carefully to what Chancellor George Osborne has to say about basic tax allowances.
If the Chancellor acted on the ambition of the Liberal Democrats, no incomes of under £10,000 would pay income tax.
On its own, without other sliding adjustments and using the evidence from 2009-10, that would take around 103,000 people out of the income tax net.
In Northern Ireland that would leave about £32m in people’s pockets.
The best expectation is that the Chancellor will move to raise the tax allowance gradually in stages.
Moving to a floor of £10,000 now could prove to be too expensive for a Chancellor, who does not have much scope for tax reductions.
The standard allowance is currently £7,475 each year.
With a tax rate of 20%, if the allowance was raised by £1,000, this would leave an extra £200 in an individual’s pay packet.
For about 30,000 people this would take them out of paying income tax.
However, the big impact would spread over all taxpayers who would have paid 20% on £1,000 of their income above the basic allowance.
If the Chancellor, as he might, decided that the increased income tax allowance would not apply to higher rate taxpayers, by lowering the threshold for higher rate taxation at 40%, the number of people benefiting from the £200 reduction could be about 550,000.
The impact would be a total household benefit of £110m.