Tax on earnings - when does the threshold go to £10k?

kyazdani

Hi there,

Got a question relating to the Lib Dem proposal to increase the threshold tax free earning to £10k rather than what it's at now which is somewhere between £6k and £7k?

This was one of the policies the Concervatives were going to keep from the Lib Dem when they brought the two parties together to form a government. Any idea when it's going to come into affect?

CLAPTON

the current level has just been increased from 6475 to 7475 (from 6th April 2011)

10k is an aspiration during the life of this parliament

SilverSix

It's proposed to increase again next april to £8,000 roughly I think?

lincoln-potter

BennyC wrote: »

It's proposed to increase again next april to £8,000 roughly I think?

The next raise is from the current level of £7475 to £8085 next April.

I know the Lib Dems want to set the tax free allowance to £10k however I don't think there is any deadline or in fact any agreement to set it that high. It is more one parties wish and the Conservatives have conceeded ground in this area in order to push through a change of their own in another.

kyazdani

I did a check on the tax checker, I'm not sure if it's calculating things correctly as I'm only £2 better off than I was with the change. Other people may get more if they earn less? I'm not sure how it works? But if they are in the same situation and earn less then they're not really that much better off.

John_Pierpoint

That other weekly tax called National Insurance has gone up for most employed tax payers.

BoGoF

Assuming you're a basic rate taxpayer you'll save £1000 @ 20% = £200 over the course of a year but has already been said NIC is going up by 1% so that will eat in to your saving.

kyazdani

BoGoF wrote: »

Assuming you're a basic rate taxpayer you'll save £1000 @ 20% = £200 over the course of a year but has already been said NIC is going up by 1% so that will eat in to your saving.

If it's only £2 a month extra to what it was I'll be £24 a year better off. Which aint a lot. I think I'm a basic tax earner. I have no dependants or any benifits? I don't know how it works really?

noodle

BoGoF wrote: »

Assuming you're a basic rate taxpayer you'll save £1000 @ 20% = £200 over the course of a year but has already been said NIC is going up by 1% so that will eat in to your saving.

It shouldn't. The NIC threshold has gone up quite significantly, so lower earners shouldn't be disadvantaged. I think that the 'break-even' point for NI in isolation is around £20k (i.e. only those earning more than that will pay more NI).

If at this point someone is £200 better off from Income tax, the NI advantage will gradually erode at £1 per £100 of earnings - meaning that overall break-even is around £40k (or so this fag-packet I'm scrawling on tells me).

Believe it or not, the folks in charge seem to have thought this one through and got it about right!