Chancellor raises personal allowances in 2008/09

Pennywise

jamesd wrote: »

Pennywise, the announcement that the higher rate threshold is being lowered by 600 is completely correct. No error in the figures or incompetance at all.

The threshold is not the 36000, that's the basic rate limit. The threshold is the salary at which you start to pay higher rate tax. So the basic rate limit of 36000 is reduced by 1200 to lower the threshold by 600 once the personal allowance is increased by 600.

Mikeyorks pointed to the HMRC site explaining "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."

Yes, but the HMRC site was changed several hours after it first appeared giving the wrong information. The extract you quote was an after thought, added long after the original, wrong, information was put on the HMRC website. Lots of people, myself included, were scratching our heads earlier in the day wondering why they'd got it wrong - obviously, someone at the Treasury/HMRC realised and changed it in the evening.

jamesd

Pennywise, what did the HMRC site originally say?

You wrote that "in the text of the Chancellors speech, he said that the higher rate threshold would be lowered by £600, which as illustrated by other posters above is wrong - it needs to be reduced by £1200".

The 600 reduction in the higher rate threshold is entirely correct, while your assertion that the higher rate threshold needs to be reduced by 1200 is wrong.

In the first post in this discussion, at 3.58PM, Milarky also gave the correct information, that the higher rate threshold would be reduced by 600.

The HMRC clarification may have been added to help sort out misunderstandings like the one you still appeared to hold when you wrote your 9:29 PM post.

No surprise there. I also initially used a 600 reduction in basic rate limit instead of a 600 reduction in higher rate threshold. Then I saw the decrease in higher rate tax and went looking for my mistake. Found it when I read Ayrshire's post here.

bertiebots

http://money.aol.co.uk/bigstorynews/experts-question-tax-rescue-package/article/20080514052309990001


I am utterly discusted at this governments attempt to con the public. Read all this article and you will be too! How can they justify compensating people who were never affected by the tax hike in the first place whilst not helping those affected the worst by this blatent tax on the poorest people in our country ...shameless.

jamesd

bertiebots, some low earners are still not fully compensated by this. For those who weren't greatly affected by the removal of the 10% band it's an added 120 to spend this year.

In the United States there's been a program of tax rebates to stimulate consumer spending and try to reduce the economic downturn there, so I've no objection to in effect doing the same here.

Changing tax rebate amounts was apparently not possible within the tax year, while changing tax thresholds and rates is, so that seems to be a significant part of why this partial fix was used.

Prosthetic_Conscience

So fully agree with you that the hidden costs of getting out of this self-inflicted hole is pretty awful. As the original silliness brought in a new 10% Savings band which is also going to add to the HMRC workload. Not least - that most people don't understand it!

Do we know for sure that the 10% savings band is going to continue? It always looked like a jury-rigged attempt to stop a problem for a certain section of people; there's nothing about it in the new announcements, but I get the feeling they've just announced what they needed to get people to say 'oh, they've given in'. It's still listed on the Revenue website, but then the tables still give the £5435 personal allowance - they haven't updated them yet.

bertiebots

jamesd wrote: »

bertiebots, some low earners are still not fully compensated by this. For those who weren't greatly affected by the removal of the 10% band it's an added 120 to spend this year.

But that is my point ...compensation is being given to more people than were affected, mostly higher earners who didnt loose out to the 10p tax cut in the first place...whilst those on the lowest incomes will still be considerabley worse off. As for the USA economy their situation is vastly different and I certainly wouldnt condone our goverment doing the same...lets face it ,if they hadnt wasted so much of OUR money in the first place we wouldnt be in this situation now. They are simply trying to tax us all to death to dig themselves out of a mess they have created.

Be_Happy

I think the wording being used is very ambiguous and is going to leave a lot of people disappointed come September. The statement that all Basic Rate taxpayers will receive an extra £60 in September and £120 over a year is surely not true. What you will get back is based on the amount of tax you have actually paid.

In my case I pay around £1 a month in tax, so when my Tax Code increases by 60 in September I'll get a rebate of the £6 I've paid so far in the year, nothing like £60. Since my savings are in an ISA, there won't even be a tax rebate there.

Getting back only what you have overpaid is fair, but this constant mention of a £60 lump sum is going to cause confusion.

Drives_Too_Much

I can't find any info on how thus will affect the self employed.
Presumably if we're basic rate tax payers we get the same 120 back as most people?
Does that mean it will be knocked off my July payment in account bill?

BoGoF

Drives too Much, it won't really affect the self employed as much as people on PAYE. Remember this is for the 2008/09 tax year, so when you submit your 2008-09 Tax Return after next April your bill will be £120 less than it otherwise would have been. The payment on account you are making in July is your 2nd payment on account for 2007/08 so nothing to do with 2008/09.

Drives_Too_Much

Thank you BoGoF.
You are right.
I was forgetting that we're pretty much a year behind PAYE types.
Was just getting excited at thinking my next bill would be lower.
As long as it feeds through eventually I'm happy.