Chancellor raises personal allowances in 2008/09

Milarky

dunstonh wrote: »

By making the adjustment by the personal allowance he can just reduce the normal increase in the personal allowance next year.

I'm not up to speed on whether this is genuinely for 'one year only' - but if it isn't (and, politically, I can't see the MPs allowing Darling to take the figure down next year even if he wanted to - if the £600 stays on the personal allow that's £120 this, £120 next year (and so on..) that won't be taken compared to the original plans. And I don't think he would try to induce fiscal drag from next year either - given inflation just took off (and the real danger for policymakers is when people start to develop 'inflationary expectations' and behave accordingly)

m_c_s

"At a cost of £2.7bn, I will increase the individual personal tax allowances by £600 to £6,035 for this financial year, benefiting all basic rate taxpayers under the age of 65," he said.

Hmmm, what caught my eye was "for this financial year". He is leaving things open for next and further years!
Also this is being funded through borrowing!

baby_boomer

Oh well. More pressure on the £, inflation and future tax rates .

At the fag end of a government it's not unusual to leave the next lot in the lurch, with no room for manoevre.

To his credit, this was one mistake John Major didn't make.

Raising the basic allowance is the right way to go. It is unfortunate that they cut the basic rate of tax at the same time, to prepare the way for the 2007 election that never was.

It's been a long time since the words "Prudence" and "Gordon" were bracketed together.

mitchaa

Ayrshire wrote: »

If my maths are correct the point at which higher rate tax would kick in would need to be 34,800 ....... down 1200 from the 36000. If they didn't then the higher tax payer gains £240 (£600 x 40%)

So average person on £50,600

Before :-
Taxable Income £50,600 -5435 (pa) = £45,165

0-36000 @ 20% = 7,200
36001 + @ 40% = (45165-36000) = 3,666

Total Tax = £10,866


After :-
Taxable Income £50,600 -5435 (pa) - 600 (extra pa) = £44,565

0-34800 @ 20% = 6,960
34801 + @ 40% = (44565-34800) = 3,906

Total Tax = £10,866


With regards the timing of the change then they'll push the allowances changes in at Sept so in effect you'll get the £10 due for Sept (i.e. the £120 per annum / 12 months) + you'll get the 'catch up' for the 5 months April through to August. Does that make sense? From that point on you just get the extra £10 each month.

Those just around the limit for higher tax are likely to get a small hit as they creep over the threshold..... i'd think.

Average person on £50,600 :rotfl:

Current threshold is set at £36000+£5435 giving a £41435 20% limit where 40% then kicks in.
The new allowance of 6035 will put the £36000 down to £35400 surely??

£35400+6035 = £41435 so a higher rate tax payer will be no better or worse off.

I think anyway.

sunshinejoclaire

I agree Mitchaa!! :rotfl: AVERAGE wage £50.6K???? I think someone has thier facts a little out..

Nomad25

Average person on £50,600 :rotfl:

What planet are they on?

sharnie48

I was worse off when the 10% was abolished so now I may get some or all of that back but poeple who haven't lost anything will be getting more ( to help with the cost of inflation) - to my mind that once again makes me worse off than others as I'm still that money behind again!

Pennywise

What fools they are!

Just think of the millions this u-turn is going to cost the country. HMRC will have to send out 100,000's of new tax codings, tax tables, CDs etc to every employer in the land. Every employer will have to waste their time in making the changes.

The Chancellor went on about how important and beneficial it was to align the tax and NIC thresholds - i.e. both tax and NIC start at the personal allowance amount and both stop at the higher rate tax threshold. He managed to introduce a massive NIC stealth tax increase by doing that by hitting people earning between £35k and £40k. Now that philosophy is abandoned as the NIC and tax thresholds aren't alligned anymore.

Does anyone really trust this load of halfwits any more?

Milarky

Text of statement, taken from the Grauniad

Marvel at the Badger's shear shopistry... ..as 'people' are turned into... 'households'!!

4.2 million households will receive as much - or more than - they originally lost. The remaining 1.1 million households will see their loss at least halved.In other words, 80% of households are fully compensated with the remaining 20% compensated by at least half. And in addition 600,000 people on low incomes will be taken out of tax altogether

Wow your friends, as you explain how - even with two chunks of the Badger's bounty some people are still going to pay more...

Mr Speaker, people aged between 60 and 64, whose average loss was £100, will also get the advantage of the increased personal allowance worth up to £120.
They also receive the additional £50 winter fuel payment for this year, which I announced in the budget.

...since £50 plus £120 is £170... ... and not the £223 from the loss of the 10% rate band....

Wonder, what only he knows he means when he says.. ...with patented Badger clarity...

For future years our aim is to continue the same level of support for those on lower incomes and I shall bring forward proposals to do this at the pre-budget report.

Wow! That word 'average' really does cover a multitude of sins don't it, Badgerman!

jamesd

Ayrshire, the announcement is that "as the £600 increased personal allowance applies not just to basic rate taxpayers but also to those paying tax at a higher rate, I am therefore reducing the threshold at which an individual starts to pay tax at the higher rate by £600".

After increasing the personal allowance the basic rate 36000 has to be reduced by 600 to keep the higher rate threshold the same. Then the announcement says that the threshold will be reduced by 600, so the total change to the 36000 is the 1200 that you calculate.