April 2008 Income Tax and NI Changes: How will they affect you?

Fastflys

Quote from Martin:

Higher Rate Taxpayers won't gain (or lose)

For higher-rate taxpayers, the 40% threshold will shift down by £600 to £40,835, meaning most will earn exactly the same as they would have done (if you earn between £40,835 and £42,035, you make a small profit).


Quote from Inland Revenue website:

The point at which customers start to pay higher rate income tax is sometimes called the “higher rate threshold”. It is the total of the personal allowance and the basic rate limit. To reduce the higher rate threshold as announced by the Chancellor, the basic rate limit will be reduced by £1,200 from £36,000 to £34,800. Higher rate taxpayers will see no difference in the amount of tax they pay.



Martin states that: "The 40% threshold will be reduced by £600 to £40,835"

The Inland revenue website states that: "To reduce the higher rate threshold as announced by the Chancellor, the basic rate limit will be reduced by £1,200 from £36,000 to £34,800".

I'm confused. At what point do I start to pay tax at 40%?

Is it tax free allowance £6,035 + £34,800 = £40,835, therefore earnings in excess of £40,835 are taxed at 40%?

Or

Is it £34,800 including £6,035 tax free allowance, therefore earnings in excess of £34,800 are taxed at 40%?

Former_MSE_Dan

Fastflys wrote: »

Quote from Martin:

Higher Rate Taxpayers won't gain (or lose)

For higher-rate taxpayers, the 40% threshold will shift down by £600 to £40,835, meaning most will earn exactly the same as they would have done (if you earn between £40,835 and £42,035, you make a small profit).


Quote from Inland Revenue website:

The point at which customers start to pay higher rate income tax is sometimes called the “higher rate threshold”. It is the total of the personal allowance and the basic rate limit. To reduce the higher rate threshold as announced by the Chancellor, the basic rate limit will be reduced by £1,200 from £36,000 to £34,800. Higher rate taxpayers will see no difference in the amount of tax they pay.



Martin states that: "The 40% threshold will be reduced by £600 to £40,835"

The Inland revenue website states that: "To reduce the higher rate threshold as announced by the Chancellor, the basic rate limit will be reduced by £1,200 from £36,000 to £34,800".

I'm confused. At what point do I start to pay tax at 40%?

Is it tax free allowance £6,035 + £34,800 = £40,835, therefore earnings in excess of £40,835 are taxed at 40%?

Or

Is it £34,800 including £6,035 tax free allowance, therefore earnings in excess of £34,800 are taxed at 40%?

Hi fastflys,

You start to pay 40% tax at £40,835. This is the personal allowance (£6,035) plus the basic rate band (£34,800).

The reason the basic rate band is decreasing by £1200 is that it is having £600 cut out at the bottom (by the personal allowance rising) and £600 cut off at the top (higher rate threshold dropping)

Hope this makes things clear

Dan

Stephenbw

doire wrote: »

:rotfl: :rotfl: :rotfl:

You are right though. The "rebel" MPs only spoke out when the chances of the party winning the next election took a seriuos blow.

They dont give a s**t for the poor

Of course they don't; that's why we now have:

National Minimum Wage.
24 days (minimum) paid holiday.
Free bus travel and free eye tests for the over 60s.
3 million child trust funds.
Working Tax Credits and Child Tax Credits.
Free entry to national museums and galleries.
£200 winter fuel allowance.
Free TV licences for over 75s.
Free nursery places for all 3 and 4 year olds.
Free school fruit for 4-6 year olds.
Written off debt for poorest countries and doubled overseas aid.
:T


As most of these measures were opposed by the 'caring' tories; their opposition to the minimum wage was rabid, I wonder how many of them we would have had under a Tory Government?
Anyone who believes that the poor would be better off under the tories is living in cloud cuckoo land.

The 10p abolition was, in my view, a mistake and meant that I was £160 worse off. The £600 tax allowance increase means that I am one of the few who will still be £40 a year worse off. However I will still be voting Labour at the next election because I have never voted simply on the basis of personal finance. Even if I did, the Tories haven't said they would reintroduce it, so why should I vote for them?

oldagetraveller

Stephenbw wrote: »

Of course they don't; that's why we now have:

National Minimum Wage.
24 days (minimum) paid holiday.
Free bus travel and free eye tests for the over 60s.
3 million child trust funds.
Working Tax Credits and Child Tax Credits.
Free entry to national museums and galleries.
£200 winter fuel allowance.
Free TV licences for over 75s.
Free nursery places for all 3 and 4 year olds.
Free school fruit for 4-6 year olds.
Written off debt for poorest countries and doubled overseas aid.
:T

Except for possibly the first item in your list, non of the rest affect the "poor". They all apply to anyone irrespective of wealth?
Typical New Labour "spin". Until Bliar I was a staunch Labout supporter and voter too.

swine

Hello.
I have an NHS Pension of £7.500 paid direct from paymaster. I have taken early retirement and this is my only income no benefits. How will these changes efffect me.
Regards.

noahveil

You will STILL be £86.50 WORSE off than you would have been had the 10p tax band not been abolished and personal allowances not been (temporarily ?) increased by £600.

Some "solution", eh ?

Nu-Labour - total financial incompetents.

johnny_storm

Working tax credits, child tax credits?

Is this some sort of cash back scheme? Why not just tax people the correct amount first, rather than over tax then offer cash back? Is this because a lot of people dont claim their cash back and lose out?

JimmyTheWig

johnny_storm wrote: »

Working tax credits, child tax credits?

Is this some sort of cash back scheme? Why not just tax people the correct amount first, rather than over tax then offer cash back? Is this because a lot of people dont claim their cash back and lose out?

Probably.

Though one advantage is that the money can go directly to the appropriate person. For example, I work full time while my wife is self-employed and doesn't earn much so doesn't pay income tax. The child tax credits are paid directly to my wife as she is the main childcarer.
Doesn't make any difference in our household as everything is joint money. (And of course by that I mean hers!) But in some relationships where the husband doesn't give the wife much money this would help.

doowopfix

Hi
I am an early retiree with a private pension of about £65 pw, incapacity of £85 pw and interest from savings...my private pension is taxed to take into consideration my incapacity via my code, but my savings are taxed currently at 20%...what value will I get out of this new proposal please?
Also my wife only gets c£90 pw state pension and interest from her savings less 20% (her total income)...how will she value from this new carrot ooopps I mean new deal ...TIA

Paul_Herring

johnny_storm wrote: »

Why not just tax people the correct amount first, rather than over tax then offer cash back?

This is tax-simplification nu-Labour style.

Is this because a lot of people dont claim their cash back and lose out?

Yup. Because the tax system in this country is so simple, people forget to claim their entitlement/get confused as to what they are entitled to.