How much better off with 20% band

kavomix

Okay i decided to go through and do some sums to working out what the break even point was for being better off under the new tax scheme for the next tax year. When the figure was originally being kicked about the media were saying anyone earning over £17000 would be better off, however i don't think that is true now.

Here it goes

Officially next tax year the personal allowance increases from the current 5225 to 5435, this increase would have happened whether the 10% bracket was removed or not. Officially the 10% bracket currently stands at 2230, however as was normal this figure would have increased and from my working would have been increased to 2300 or just over that. So below are figures for next tax year with calculations for old system, and new system


Old System

Income: £17,000
Taxable amount: £11,565
Tax at 10%: £230
Tax at 22%: £2038.30
Total Tax: £2268.30

Income: £18,000
Taxable amount: £12,565
Tax at 10%: £230
Tax at 22%: £2258.30
Total Tax: £2488.30

Income: £19,000
Taxable amount: £13,565
Tax at 10%: £230
Tax at 22%: £2478.30
Total Tax: £2708.30


New System
Income: £17,000
Taxable amount: £11,565
Tax at 20%: £2313
Total Tax: £2313

Income: £18,000
Taxable amount: £12,565
Tax at 20%: £2513
Total Tax: £2513

Income: £19,000
Taxable amount: £13,565
Tax at 20%: £2713
Total Tax: £2713


So as you can from my workings above the break even limit under the old system is not £17k, nor £18k or £19k. From my workings the figure is £19,250

Just thought i'd share my view/workings on this just to show people what the true amount is before they become better off under gordon's changes.

bryanb

Have you done the other calculation? The one to show how much worse off people with lower incomes will be?

cdafonseca

for someone who earns £16 000
Old System

Income: £16,000
Taxable amount: £10565
Tax at 10%: £230
Tax at 22%: £1818.3
Total Tax: £2048.3

New System
Income: £16,000
Taxable amount: £11,565
Tax at 20%: £2113
Total Tax: £2113

ManAtHome

Yes, been discussing something similar on another thread - the increase in allowances (which would have happened anyway) seems to be included in most calculations. Even with that included, the lower-paid are being robbed, but I suppose somebody has to pay for the trough-snouter's 8%+ increase in expenses (and maybe yet another above-inflation payrise later this year) - surprised they still need the back-handers as well...

Kaz64_2

I didn't know about this... terrific! Why take this little crumb of happiness away from the lower paid? They can't afford this hike!

cdafonseca

Kaz64 wrote: »

I didn't know about this... terrific! Why take this little crumb of happiness away from the lower paid? They can't afford this hike!

the riches get better and the poor get worse

kavomix

I think it was well published that lower paid were being had hit with this from the offset. I was just wanting to show how much you had to be earning above to work out better off. I wonder what percentage of the population will now be paying more

The median wage for 2006/07 was £23,764 (Women - £20,488, Men - £25.896)
The top 10% yearly wage is £47,112 while the bottom 10% is £13,104

so we know that at least 10% of the working population is worse off, but what is the actual figure?

Keith1946

I have been making similar comments in other threads, put the point which is not getting across is that the lower your Gross Income (down to the "Free Allowance") the greater the affect. There will be many that will be recompensed by changes in Tax or Pension Credits. But there are many like myself who took early retirement for health reasons are not able to claim"Credits" because of their savings.
I estimate my tax will increase by approximately £193 on gross Income of £9141 per. year. These figures were confirmed by my local Tax Office.
The Financial Press are not bothered as the numbers affected are not great, this is illustrated by the small number of signatories on the two Downing Street Petitions.

ManAtHome

Keith1946 wrote: »

The Financial Press are not bothered as the numbers affected are not great, this is illustrated by the small number of signatories on the two Downing Street Petitions.

The financial press are probably not that interested as financial press salaries are likely to be above median pay of around £19k (which is lower than "average pay" of around £25k). As usual, a large number of people have been conned by mcbroon announcing tax reductions (headline - 22% down to 20%, dropping the 10% band on page 248) and will only wake up when they see their pay packets from April.

dunstonh

It was pretty well covered in the media at the time of the announcement as well.