Autumn statement 40% tax confusion

mrkbrrws

jingleberry wrote: »

No, there is some confusion in todays statement. Prior to today, the tax free allowance for 2013/14 was expected to be £9205 and the 20% tax band £32245, meaning we could earn a total of £41450 before paying 40%. However we now know that the tax tax free band has risen by another £235 to £9440. And in his statement Osborne said 'And this time I propose toextend the benefits of this further increase to higher rate taxpayers.', implying the 20% band should stay at £32245 so 40% tax should kick in at £41685. Yet elsewhere in his speech Osborne says 'The higher rate threshold will beincreased by 1% in the tax years 2014-15 and 2015-16. So the income at which peoplestart paying the 40% rate will go up from £41,450 to £41,865 and then to£42,285.' ie in these later figures he has not recognised the £235 increase. So it is unclear. Hopefully the 40% tax band for 2013/14 will be £32245 but it might be £235 less ie £32010.

As an example, your income is £50,000.

Before £9,205 nil
£32,245 @ 20% = £6,449
£8,550 @ 40% = £3,420 totals £9,869

After £9,440 nil
£32,010 @ 20% = £6,402
£8,550 @ 40% = £3,420 totals £9,822

saving £47, i.e. £235 @ 20% the same as basic rate taxpayers.

jingleberry

Ah yes I see it now - I should have twigged when I read that 40% taxpayers were going to be £47 better off (£47 being 20% of £235). Thanks for the explanation

ceeforcat

They never make it easy to remember these numbers do they?

Why could the basic rate band not be £32000 instead of 32010?
Why is it currently 34370?
Why can't the new ISA allowance be £11500 instead of £11520?
Why can't the Personal Allowance be £9400 or £9500 instead of £9440?
Why can't the CGT allowance be a nice round £11000 eand not £11100 etc etc etc?

Pennywise

ceeforcat wrote: »

They never make it easy to remember these numbers do they?

Why could the basic rate band not be £32000 instead of 32010?
Why is it currently 34370?
Why can't the new ISA allowance be £11500 instead of £11520?
Why can't the Personal Allowance be £9400 or £9500 instead of £9440?
Why can't the CGT allowance be a nice round £11000 eand not £11100 etc etc etc?

Because they just don't think logically like anyone in the real world would and they don't actually use the figures themselves. Sat around the table, the ministers and senior civil servants will agree say 1% increase, never even giving a second thought to what the current numbers are. By the time the decision has trickled down to the minions who actually do the changes, who see the numbers, it's too far down the line to suggest rounding to more sensible numbers. The decision makers are clearly far too far away from reality.

Just like any large organisation when it comes to pay setting. They decide at board level to say 2.5% increase which inevitably means silly hourly rates or annual salaries. Compare that with a small private firm, where you find that staff salaries are nearly always in round thousands, if not hundreds, i.e. someone on salary of £25,000 gets an increase to £25,500 or £26,000, not to £25,625. It's all about actually knowing the numbers, which doesn't work when the decision makers are too remote and not interested.

p00hsticks

ceeforcat wrote: »

They never make it easy to remember these numbers do they?

....Why can't the new ISA allowance be £11500 instead of £11520?

I can't comment off hand on any of the others you quote, but an ISA allowance of £11520 is divisible by 12, allowing people who wish to contribute monthly to add a nice round £960 a month.

An allowance of £11500 might sound slightly easier remember to you but is downright messy if you start dividing by 12 - so there is sometimes logic behind the apparent madness :-).

ceeforcat

p00hsticks wrote: »

I can't comment off hand on any of the others you quote, but an ISA allowance of £11520 is divisible by 12, allowing people who wish to contribute monthly to add a nice round £960 a month.

An allowance of £11500 might sound slightly easier remember to you but is downright messy if you start dividing by 12 - so there is sometimes logic behind the apparent madness :-).

I take your point - the £960 makes sense. However, before anyone gets the wrong idea, this would be £480 cash.

Now, why could that not be £500?