MSE News: Budget 2012: Personal tax allowance to rise

Rollinghome

molley wrote: »

I'm still a bit confused but as I was born in 1943 does that mean ( as it seems to be saying) I'll continue to get the ARA from 2013.

Unfortunately, whereas the standard personal allowance will go up for those under 65, for those over 65 it won't. So with inflation you will pay more tax in real terms. The age allowance will stay at £10500 so after a couple of years or so it will be the same as the standard allowance and have gone completely.

A bit unfair when savings are already being eroded in value due to inflation but below inflation rates of interest are being taxed as if they were gains, which in real terms they aren't.

dougz_2

SnowMan wrote: »

The chart B2 on page 91 of the budget report tells the true story.
So taking out the very top 10% of earners the lower your earnings the harder you are hit by the budget

I doubt the top 10% are really going to do worse than anyone in the bottom half either. Because, as pointed out here , they have cunningly left out the effect of the 50% being cut, which is obviously going to help that top 10% to a significant extent. And you can bet once their fancy accountants have got onto it, their tax rises, which are included, will be much reduced too.

thelawnet

Boposop wrote: »

Does anyone know ...

Is the personal allowance being reinstated for incomes >100k or not?

Thanks.

Here's a spreadsheet showing the effects of the NI/IT changes:

http://www.!!!!!!/document/3k4c6bxE/Tax_changes.html

Basically, basic rate tax payers save £148 (in real terms).

Higher rate tax payers lose £85 (again, in real terms).

People earning £100-£114.5k are hit by fiscal drag (the £100k 60% tax threshold has not been uprated), and lose £742.

There is a double whammy here, in that the size of the basic rate threshold has shrunk while the tax allowance has grown. This means the 60% tax band has widened, and now includes income between £100k and £118,410.

Anyone earning just over £100k needs to find a way to get this under £100k.

People earning currently £116,210 up to £150k will pay £404 more tax, in real terms, as a result of the shrinking of the basic rate allowance.

For people earning over £150k, the saving from 50% to 45% tax starts to kick in, so this becomes less of a concern.

The 60% tax rate was ludicrous before, and now they've made it bigger!

So the answer to your question is 'No!'

As above, if you earn just over £100k, you need to take whatever steps you can to avoid this ludicrous tax rate. Work less, put it into a pension, whatever floats your boat. But don't pay it!!!

AirlieBird

thelawnet wrote: »

Here's a spreadsheet showing the effects of the NI/IT changes:

http://www.!!!!!!/document/3k4c6bxE/Tax_changes.html

Basically, basic rate tax payers save £148 (in real terms).

Higher rate tax payers lose £85 (again, in real terms).

Sorry, but these figures aren't correct.

From today's announcements alone Basic rate taxpayers gain by £170 in real terms.
Higher rate taxpayers (under pension age) gain £42.50 in real terms - £85 more in income tax, but £127.50 less in NICs.
Higher rate taxpayers over pension age lose £85 in real terms (as they don't pay NICs)

molley

Rollinghome wrote: »

Unfortunately, whereas the standard personal allowance will go up for those under 65, for those over 65 it won't. So with inflation you will pay more tax in real terms. The age allowance will stay at £10500 so after a couple of years or so it will be the same as the standard allowance and have gone completely.

A bit unfair when savings are already being eroded in value due to inflation but below inflation rates of interest are being taxed as if they were gains, which in real terms they aren't.

OK ,that's what I thought but what I was referring to ( and it didn't get quoted in my reply) was this part ( I was born in 1943) . Do you know what that means ?

"From April 2013, ARAs will no longer be available, except to those born on or before 5 April 1948. "

thelawnet

AirlieBird wrote: »

Sorry, but these figures aren't correct.

From today's announcements alone Basic rate taxpayers gain by £170 in real terms.
Higher rate taxpayers (under pension age) gain £42.50 in real terms - £85 more in income tax, but £127.50 less in NICs.
Higher rate taxpayers over pension age lose £85 in real terms (as they don't pay NICs)

Why do you trust everything you read?

You can download the spreadsheet and check for yourself.

The 'gain' of £42.50 assumes incomes remain static, which they don't. It's clearly wrong not to uprate incomes when evaluating changes, because (a) they are not static, and (b) any model under which incomes remain static faces the fatal flaw that in the long run any amount of money today becomes worthless.

So I'm quite happy that my numbers are more accurate than any model that fails to consider the real value of the wage.

AirlieBird

thelawnet wrote: »

Why do you trust everything you read?

I don't.

thelawnet wrote: »

You can download the spreadsheet and check for yourself.

I don't need to. I calculated them for myself thanks.

EDIT: I downloaded your spreadsheet. I don't know where you got your inflation figure from but its not right. If it's CPI it should be 2.6%, if it's RPI 3%.

thelawnet wrote: »

The 'gain' of £42.50 assumes incomes remain static, which they don't. It's clearly wrong not to uprate incomes when evaluating changes, because (a) they are not static, and (b) any model under which incomes remain static faces the fatal flaw that in the long run any amount of money today becomes worthless.

A change in income is irrelevant. The figures show what somebody earning £x in 2013-14 would gain/lose from this single measure compared with what they would have paid in IT/NICs in 2013-14 without the measure.

If you want to show year-on-year changes then fine, you have a very reasonable case for increasing incomes but that isn't what my/HMRCs figures are showing.

mr._prude

Is this correct?

Those with 35k-42.4k salaries will be taxed at 51% on those earnings above 35k, this is because of a mismatch between the income tax and national insurance (40% income tax threshold is 35K and 11% national insurance is threshold 42.4k).

However those with 42.6k-100k salaries will only be taxed at 41% (40% income tax & 1% national insurance) on earnings above 42.6k.

Mr P

AirlieBird

mr._prude wrote: »

Is this correct?

Those with 35k-42.4k salaries will be taxed at 51% on those earnings above 35k, this is because of a mismatch between the income tax and national insurance (40% income tax threshold is 35K and 11% national insurance is threshold 42.4k).

However those with 42.6k-100k salaries will only be taxed at 41% (40% income tax & 1% national insurance) on earnings above 42.6k.

No. The £35k is the width of the basic rate band. You need to add the personal allowance to that - so that basic rate tax is charged on incomes between the PA and £42.4k. The point at which you start paying 40% tax and stop paying full NICs was aligned in 2009-10.

National Insurance is 12%.

mr._prude

Thanks for explaining this

Mr P