Abolition of the 10% Tax Band and reduction of Standard rate to 20% [Merged]

Hoddie_2

I was just curious as to who would be adversely affected by the abolotion of the starting rate band next year?

Assume someone earning National Minimum Wage of £5.52/hour, working 37 hours per week, total annual income of £10,620.

Total tax bill 2007-08 is £919.
Total tax bill 2008-09 will be £1,037.
An increase of £118.

Assume someone £13.44/hour, working 37 hours per week, total annual income of £36,341.

Total tax bill 2007-08 is £6,577.
Total tax bill 2008-09 will be £6,181.
A decrease of £396.

The threshold at which the new rates become beneficial seems to be around the £16,500 mark. The government reckons changes to the Tax Credit system will offset any increased tax paid by low earners, but that assumes that people either have children or are aged 25 and working 30 hours or more per week.

It would seem that those hardest hit by the new tax rates will be the young and childless, quite a large group of people I'd have thought.

PasturesNew

It was said at the time that any single person earning less than £18,000 would pay more in tax.

That would have been me, but I now have a 2nd income I am building up online, which is growing, so the combination of my earned pay for an employer and my extra online earnings come to more than this. Thank goodness.

I started building a second income online as I've spent years in/out of work - always at the "mercy" of poor paying employers. So decided rather than continuing in my boom/bust I'd build something up myself, expecting it to take 3-4 years to equal my full-time earnings.... that way I could work and my other earnings are a "welcome bonus", but each time I find myself "between jobs" I am not in any panic any more to suddenly find the next person that will give me a job/any job. Which invariably was at less money as you take the first thing you're offered.

One year on and it is making that difference already and instead of being a few grand under that £18k, I'm now a few grand over it.

DavidLaGuardia

The simplest thing to do, which would have made no one worse off would have been to raise the personal allowance by a minimum of half the 10% band. This would mean the upper half that was in the 10% would fall into 20% band and come out the same.
If this was too expesive for the treasury (???!!!) as it would benefit everyone, the basic rate tax could have been left alone or perhaps the 20% kept but the 40% threshold reduced by the apporpriate amount to account for the rise in allowance

derrick

Hoddie wrote: »

Assume someone £13.44/hour, working 37 hours per week, total annual income of £36,341.

£13.44 x 37 = £497.28 x 52(weeks) = £25,858.56

Where do you get £36,341 from?

Hoddie_2

Where do you get £36,341 from?

Yeah, I dunno. I just wanted a BR salary to demonstrate my point. Would you believe I checked my maths several times too...?

Jennifer

See:-

http://forums.moneysavingexpert.com/showthread.html?t=581356

jh

bye_bye_band_G

It will affect me.
I earn about the single person's allowance.
But I also have building society interest, taxed at source at 20%.
In previous years I have been able to reclaim the full 10% banding from this - I think its about £2000 - so my rebate has been 10% of £2000 - about £200.
This is going to disappear. I have not seen this situation mentioned elsewhere but believe it will be quite common.

Hoddie_2

Good news, the 10% band remains for investment income only, so your annual rebate will still be there.

oldwiring

Hoddie wrote: »

Good news, the 10% band remains for investment income only, so your annual rebate will still be there.

Hi there
IIRC Bank interest and the like is treated as paid at the standard rate but, forgive me if the terminology is wrong, it forms the top slice of one's income. Therefore am I right to conclude that the 10% rate will only app;y to those having very small incomes, and that well off blighters like me will pay 20%, come what may?

jem16

Yes you are correct.

flashnazia

I don't know if this has been raised before but I'll remind you again anyway.

Low earners (less than 19k) will have to pay more tax next year from april because of the abolition of the 10p tax band. I'm getting more and more angry about this. Why is Brown penalising low earners like this?

is it too late? Is there anything we can do (like the business leaders who are protesting about abolition of taper relief)?

Makes you want to give up working....