MSE News: Budget 2013: Personal tax allowance

cotswoldaccountant

Careful_ly wrote: »

example 2013/14

income from earnings, or pensions, plus bank and building society accounts
£12230 - allowances of £9440 = £2790 taxed at 10% band = £279, so nett amount is £11951

This example only works if the individual's taxable income of £2,790 is all savings income. Assuming it is, then the tax is indeed £279 in 2013-14. If the £2,790 is partly savings income and partly income from employment or pension, then only the savings portion will be taxed at 10%. The remainder of the taxable non-savings income will be taxed at 20%.

Careful_ly

I watched the budget, my impression from what he said was that the 10% band was ending and it was now going to be a 0% band.

What I think he meant was that the 10% band was ending and that it didn't matter because he had increased the allowances.

From my personal finances it does matter I will have £167 a year less, and I am not alone!!

UsetheFORCE

Careful_ly wrote: »

I watched the budget, my impression from what he said was that the 10% band was ending and it was now going to be a 0% band.

What I think he meant was that the 10% band was ending and that it didn't matter because he had increased the allowances.

From my personal finances it does matter I will have £167 a year less, and I am not alone!!

Did you take note that barely last month, Ed Miliband stated that he wanted to reintroduce a 10% band? Pretty pointless, I would rather they increase the personal allowance which they are doing.

It would not surprise me if the allowance wasn't near 11k by the time of the next election.

molerat

The only mention I found of the 10% rate was in a BBC article

There is one extra bonus for a small group of people, mainly pensioners, who pay 10% on savings if they have no other income. This is charged on a narrow band of savings above the personal allowance, so they will pay less tax because the personal allowance has gone up.

Labour love trying to convince people that a 10% rate would be a great benefit, those who believe it obviously cannot do simple sums !

John_Pierpoint

UsetheFORCE wrote: »

The 10% rate went years ago. The Chancellor was actually making the point about the fiasco over it and how he has removed the problem now that the income bands that was covered by it have now been completely covered by the 10,000 personal tax allowance!

Points scoring over the mess Labour made of the situation! He was basically saying that the people who benefitted from the 10% now pay 0% on that income due to the Personal Allowance.

That is not actually true, there is still a 10% band aimed at the likes of pensioners who get a basic pension that mops up their personal allowance, but they have a bit of savings income on top.

The ones who find their "never save" neighbours better off by claiming pension credits.

Careful_ly wrote: »

I watched the budget, my impression from what he said was that the 10% band was ending and it was now going to be a 0% band.

What I think he meant was that the 10% band was ending and that it didn't matter because he had increased the allowances.

From my personal finances it does matter I will have £167 a year less, and I am not alone!!

It would seem from the above posting that the chancellor was just thumbing his nose at the opposition and the 10% band remains? [or is this another pasty tax muddle?]

UsetheFORCE

John_Pierpoint wrote: »

That is not actually true, there is still a 10% band aimed at the likes of pensioners who get a basic pension that mops up their personal allowance, but they have a bit of savings income on top.

The ones who find their "never save" neighbours better off by claiming pension credits.



It would seem from the above posting that the chancellor was just thumbing his nose at the opposition and the 10% band remains? [or is this another pasty tax muddle?]

I acknowledged that such a tax on savings existed, the Chancellor was almost certainly making the point in relation to income tax. Everyone affected by the 10% earned income tax band now pays 0% on that relevant income and so the issue is now resolved permanently.

In regards to savings, people are better off as the gap lessens as the Personal Allowance increases.

John_Pierpoint

The question is does the 10% band still exist? Yes or no ?

It is like all the other half baked headline grabbing attempts to put together a budget, without attention to the details in the world's second most complex tax code.

How you pay tax on savings income

Savings income is added to your other income and taxed after your tax-free allowances - for example Personal Allowance - have been taken into account, as follows:

• taxable savings income that falls within the £2,710 starting rate for savings Income Tax band is taxed at 10 per cent - but only if the rate band has not been used up by other income as savings income is taxed last
• taxable savings income (included with any other income) that rises above the £2,710 starting rate for savings Income Tax band, but falls within the £34,370 basic rate band, is taxed at 20 per cent

http://www.hmrc.gov.uk/taxon/bank.htm

Ximian

To work out how much tax I pay or will pay, I like to use the following website, it has a handy Tax calculator: http://www.listentotaxman.com/

The calculator will take any pension contributions, deductions, and tax codes into account.

CLAPTON

According to the BBC this morning, the HMRC record of what the chancellor said about the 10% rate has been censured (well they actually said removed)

However the Hansard record gives the full record.

The conclusion was that there was no change in the 10% savings rate and Osbourne was merely trying to make a 'clever' party political point.

John_Pierpoint

Yes the on-going existence of the 10% band (as above) was confirmed at lunch time in the Radio 4 Moneybox programme.
What I described as an episode of "nose thumbing" was described as an attempt at a joke, that had fallen flat because it has had to be explained.

A moment a bit like Nigel Lawson's "duck test" attempt at repealing a tax every year, when he abolished a pension limitation imposed on those who kept on working. There was a sort of stunned silence as the majority of MP's, who are also unable to understand their tax system, paused to think to themselves "What the devil is he on about?":

Secretary of State for Social Security and I have agreed that the pensioners' earnings
rule should be abolished from the beginning of October, the earliest practicable date.
The necessary legislation will be included in the Social Security Bill currently before the House.

The cost to public expenditure will be £190 million in 1989-90, which will be entirely met from the Reserve, but the net cost of this measure will be significantly reduced by the income tax payable on the increased pensions.

Those who wish to defer taking their pension will remain entirely free to do so, and will continue to earn a higher pension in return. I am sure the whole House will welcome this long-overdue reform.

If I were to adopt the so-called "duck test" now in vogue across the Atlantic, the pensioners' earnings rule would probably qualify as a tax, and I would now be able to claim to have abolished a sixth tax, but sound tax principles, coupled with my innate modesty and natural reticence, prevent me from doing so.