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Chancellor raises personal allowances in 2008/09
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Milarky
Posts: 6,356 Forumite
in Cutting tax
In an statement given at 3.30pm, 13 May
http://news.bbc.co.uk/1/hi/uk_politics/7397705.stm
.. to compensate 'basic rate' taxpayers by £120 (£600 increase x 20% starting rate tax) 'with immediate effect'. The threshold for Higher Rate taxpayers is being dropped by a like amount (£600 decrease x (40% - 20%) differential rate?) so that they don't benefit further...
and something about being for 'one year only' but we will await publication of more details ...
http://news.bbc.co.uk/1/hi/uk_politics/7397705.stm
.. to compensate 'basic rate' taxpayers by £120 (£600 increase x 20% starting rate tax) 'with immediate effect'. The threshold for Higher Rate taxpayers is being dropped by a like amount (£600 decrease x (40% - 20%) differential rate?) so that they don't benefit further...
and something about being for 'one year only' but we will await publication of more details ...
.....under construction.... COVID is a [discontinued] scam
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Comments
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By making the adjustment by the personal allowance he can just reduce the normal increase in the personal allowance next year.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0
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apparently £60 lump sum in September and then £10 a month until the end of the year. The new tax allowance will be £6035.
"Stay Wonky":D
:j:jBecome Mrs Pepe 9 October 2012 :j:j0 -
Can someone explain how this come into being?
If in September pay packet is the full year allowance being back dated to April 1st?
Is that beginning or end of September?0 -
Personal allowances are still much too low. It's an absurd contradiction that someone on the minimum wage should have to pay income tax. Either the 'minimum' is the minimum for someone's personal needs or it isn't.0
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I assume he is saying that the new tax codes will start to be used in september.....
so your first salary in septenber will benefit by the 6/12 of the 600 increase which is 300 so you see a benefit of 10% of 300 = £60
thereafter you see an increase in allowance of 1/12 of 600 i.e 50 so 20% of 50 is £100 -
I've just used ListentoTaxman and even putting the allowance up I'll be £10 a month worse off over the year than the old 10%/22% system.
Not much I know - but it adds up!"Stay Wonky":D
:j:jBecome Mrs Pepe 9 October 2012 :j:j0 -
If my maths are correct the point at which higher rate tax would kick in would need to be 34,800 ....... down 1200 from the 36000. If they didn't then the higher tax payer gains £240 (£600 x 40%)
So average person on £50,600
Before :-
Taxable Income £50,600 -5435 (pa) = £45,165
0-36000 @ 20% = 7,200
36001 + @ 40% = (45165-36000) = 3,666
Total Tax = £10,866
After :-
Taxable Income £50,600 -5435 (pa) - 600 (extra pa) = £44,565
0-34800 @ 20% = 6,960
34801 + @ 40% = (44565-34800) = 3,906
Total Tax = £10,866
With regards the timing of the change then they'll push the allowances changes in at Sept so in effect you'll get the £10 due for Sept (i.e. the £120 per annum / 12 months) + you'll get the 'catch up' for the 5 months April through to August. Does that make sense? From that point on you just get the extra £10 each month.
Those just around the limit for higher tax are likely to get a small hit as they creep over the threshold..... i'd think.0 -
How can something that doesnt start till September be 'with immediate effect'.0
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By 'effect' they mean 'value' - it has 'value' from 6th April 2008 at the rate of £10 benefit per month. By September (I think they mean the start of October, actually) this benefit is worth £60 in tax rebate - and will be 'received' in that month's payslip. Thereafter monthly tax bills (PAYE) will be £10 less than otherwise.johnny_storm wrote: »How can something that doesn't start till September be 'with immediate effect'.
[Opps! I see others had already explained this..].....under construction.... COVID is a [discontinued] scam0 -
I agree with your argument entirely but I think we only differ over the semantics of what is involved: They are dropping the actual 'threshold' - being the amount actually earned - at which tax will be paid at 40% by £600. But they are also raising the other 'threshold' by £600 also - to £6035. The effect is - as you point out - to 'compress' the actual 'band' for basic rate tax by the combined amount of £1200 - that is, down from £36,000 to £34,800If my maths are correct the point at which higher rate tax would kick in would need to be 34,800 ....... down 1200 from the 36000. If they didn't then the higher tax payer gains £240 (£600 x 40%)
[phew!].....under construction.... COVID is a [discontinued] scam0
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