Withdrawal of 10% tax band; some number-crunching please.

seven-day-weekend

My husband has an index-linked pension which at the moment is £7495 p.a. His tax code is 245T.

What difference will the withdrawal of the 10% tax band make to the amount of tax he has to pay?

I hope I've given enough information, but please ask for more if necessary.

Thanks in advance.

fengirl_2

Need to know the weekly rate of his state pension from April 2008, together with the amount of any other income.

jem16

This year;

£7495 minus £2450 ( tax-free allowances) = £5045

£2230 @ 10 % = £223
£2815 @ 22% = £619.30

Total = £ 842.30

Next year - tax-free allowances rise by £210 for under 65


£4835 @ 20% = £967

Difference = £124.70

I seem to remember you mentioning your husband took early retirement but will be getting his state pension soon. When is he 65?

seven-day-weekend

Thanks both; he is not 65 until January 2014, therefore does not receive State Pension yet.

He also gets Incapacity Benefit, at £2692 per year (51.78 per week ) and a small annuity of £550 per year.

These are the 2007 rates, we don't know the 2008 rates yet.

The Teachers' Pension is I think index-linked to Retail Price index, the IB does go up but I don't know on what criteria they make the increases, the annuity stays as it is.

Jem, are you saying it will only make a difference of around £125 a year?? I appreciate this may be an estimate, but if it's anything like that we won't lose any sleep. I thought it would be a lot more.

Thanks again!

jem16

seven-day-weekend wrote: »

Jem, are you saying it will only make a difference of around £125 a year?? I appreciate this may be an estimate, but if it's anything like that we won't lose any sleep. I thought it would be a lot more.

Thanks again!

Based on the figures you gave me for his teacher's pension yes that should be correct. I have factored in the increase in the personal allowance for under 65s.

seven-day-weekend

That'll be a result then.

Thanks!

ManAtHome

I suppose the real damage is £223 - extra 10% of the first £2230 above your allowance. Masked a bit by allowances going up, but they normally go up anyway.

Jem - is the £210 increase to the full allowance (so likely to be less for a lower tax code)?

epz_2

ManAtHome wrote: »

I suppose the real damage is £223 - extra 10% of the first £2230 above your allowance. Masked a bit by allowances going up, but they normally go up anyway.

Jem - is the £210 increase to the full allowance (so likely to be less for a lower tax code)?

got to love the fact this got changed so gordy boy could give a tax cut to everyone on over 35k if i recall, be sure to thank him come election time.

CIS

The £210 should be received in full, adjustments to your tax code will reduce the tax free allowance , not the increase in the tax bands for which the £210 is for.

seven-day-weekend

So....is it £125 or £223?

Maths has never been my strong point!

jem16

It's £125 as per my post 3.

This year you are paying tax on £5045 after your tax-free allowances have been deducted.

Next year as the tax-free allowances go up you will pay tax on £4835.