The government has published
the 2008/09 rates and allowances for income
tax, national insurance contributions (NI),
the state retirement pension as well as other
benefits and allowances. To view a full list
of the allowances please use the link below.
The amount of the personal allowance for 2008/09
has been confirmed at £5,435, an increase
of £210 on the current personal allowance
of £5,225.
The government had previously announced that
it is to radically change the income tax rates
for 2008/09 onwards. The 10% starting rate
is to be abolished for earned and pensions
income and the 22% basic rate of tax will be
reduced to 20%. The higher rate of tax is set
to continue at 40%. The starting rate will
continue to be available for savings and investment
income. There are no changes to the tax rates
applicable to dividends.
Lower paid earners lose out
As the NI limits have also been announced it
appears that those taxpayers who earn less
than approximately £15,000 a year will
be worse off in the new tax year. For
an employee earning £10,000 they will
be approximately £100 worse off a year.
This is because the benefit of the reduction
in the basic rate of tax from 22% to 20%
is outweighed by the unavailability of the
10% band.
What about those on higher salaries?
HMRC had previously announced increases in
the earnings on which employees pay 11% NI.
The press release confirms that 11% NI will
be due on pay between £105 and £770
a week. Until the income tax higher
rate limit (the amount of taxable income
an individual can receive before paying tax
at 40%) is announced, it is impossible to
fully calculate the affect on higher earners.
Internet link:
Treasury
rates and allowances |
