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  • FIRST POST
    • Former MSE Wendy
    • By Former MSE Wendy 18th Mar 08, 3:18 PM
    • 868Posts
    • 1,782Thanks
    Former MSE Wendy
    April 2008 Income Tax and NI Changes: How will they affect you?
    • #1
    • 18th Mar 08, 3:18 PM
    April 2008 Income Tax and NI Changes: How will they affect you? 18th Mar 08 at 3:18 PM
    Updated 2 September 2008
    (Comments in the discussion may relate to earlier incarnations of this information)


    After the huge '10p tax row' in April, the Government upped everyone's income tax personal allowance (the amount you pay no tax on) from £5,435 to £6,035 to make up for it.

    This takes effect next Sunday (7 Sept), so if you earn between £6,035 and £40,835, watch your payslip to ensure you get the extra cash.

    What's the background?

    In the government's 2007 Budget report, it got rid of the old 10% rate of income tax, and reduced the 'basic rate' from 22% to 20%. Yet when this change was implemented in April 2008, public uproar followed as people earning between around £6,000 and £15,000 actually brought home less pay.

    To fix this imbalance, on 13 May 2008, the Chancellor announced everyone's tax-free Personal Allowance for 2008/09 (i.e. this tax year) would rise £600 to £6,035, to reimburse those who lost out when the 10p tax-rate was scrapped; and give a tax cut to many others.

    What happens now?

    Even though this was announced in May, personal allowances officially increase to £6,035 on 7 September.

    For all basic-rate taxpayers the impact is a £120 gain; this money will go straight into your pay, with the first £60 coming in September, and an extra £10 per month for the rest of the financial year until next April.

    You shouldn't need to do a thing in order to get this cash; if it doesn't appear in your next paypacket, speak to whoever deals with the payroll at your place of work.

    Will this make up for the end of the 10% band?

    If you are a basic-rate taxpayer earning £6,035 or more, you'll pocket £120 more over the year than you would have done before this announcement.

    This will make up what you lost when the 10% band disappeared, unless you earn between £7,130 and £9,075, when you could still be up to £30 out of pocket compared to last year. The Govt says many will have had tax credit rises too and possibly balance this out, but if it applies to you read my full Benefits Check-up article to find out more.

    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 £41,460, you make a small profit).

    See the Chancellor's full statement from May 2008

    For a bigger range of data and figures for overs 65s go to HMRC rates


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    Last edited by Former MSE Andrea; 02-09-2008 at 6:51 PM.
Page 2
  • meester
    Erm - no it won't; it'll cost you exactly the same.

    On 100 gross pay, you currently get taxed 22 and contribute 78 from net pay to get the 22 refund to contribute 100.

    Next year, 100 will be taxed 20, you pay 80 net, to get 20 refunded to contribute 100.

    Any perceived increase in net contribution is offset by an increase in net pay.
    Originally posted by Paul_Herring
    Not really true, because you don't actually have to pay tax to get tax relief.

    You can contribute 3,800 a year into a pension, without paying any income tax at all and still get tax relief at the basic rate. You have only contributed 3,800, and get 950 extra free.
    • Paul_Herring
    • By Paul_Herring 20th Mar 08, 7:34 AM
    • 6,944 Posts
    • 3,622 Thanks
    Paul_Herring
    things are much worse near the bottom end.
    Originally posted by ManAtHome
    you don't actually have to pay tax to get tax relief.
    Originally posted by meester
    Both valid points, I concede, but these, IMHO, are at the extreme end of things.

    Outside of the financially aware audience of MSE (and similar sites,) how many people is this affecting?

    Specifically, how many low-wage/no-wage contributors to personal pensions are there? Compared to, say, those earning above the 22/20% marginal tax rate. I'm guessing not that many.

    I'd assume there are a darn sight more not contributing to a pension that are (worse) affected, or a lot more who are contributing but are worse off because of the sneaked in NI band increase, that while mentioned in the thread title, strangely wasn't mentioned in the first post of this thread...

    This is not to demean the people who contribute and are affected - just that I don't think it applies to most of the people contributing to pension funds.
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
    • XRAT
    • By XRAT 20th Mar 08, 2:30 PM
    • 208 Posts
    • 188 Thanks
    XRAT
    Dear Meester,

    3800?

    Should that be 2808 grossed to 3600???
  • crossleydd42
    I feel sorry for those female state pensioners between 60 and 65 who do not benefit from the increased personal allowances for pensioners aged 65+ and will suffer accordingly.

    Such a mean-spirited government with a callous indifference to the waekest/poorest members if its society.

    "Some say the cup is half empty, while others say it is half full. However, this is skirting around the issue. The real problem is that the cup is too big."
  • mickyrush
    I agree with almost everything you say except for one thing,THIS IS NOT a Labour Govt.I've been a Labour supporter all my life and if I know one thing,this shower are more Tory than the bloody Tories!!
  • GOONER222
    I am in the same situation and feel our Labour government betrayed workers on low incomes and brought more gloom and misery in their lifes. But what can you do?
    Originally posted by lovingheart
    Not vote bloody labour anymore.
  • ShelfStacker
    I agree with almost everything you say except for one thing,THIS IS NOT a Labour Govt.I've been a Labour supporter all my life and if I know one thing,this shower are more Tory than the bloody Tories!!
    Originally posted by mickyrush
    Sadly for all of us, the only viable alternative right now (the Lib Dems, sadly enough, are nowhere near power) are the actual Tories.

    Christ help us...
  • abzie87
    Well, I am happy to be on the positive side of the graph. But I can't help but feel that there is something wrong with the worst paid workers being worse off, especially with the effect of other bills rising.
    Originally posted by simongregson
    yeh tell me about it - i work for the nhs and earn just under 15,000 so will be worse off with the changes, but i'm not entitled to any benefits, so what with rising petrol, energy bills, rent, food, and the government fixing our (nhs staff) pay for 3 years - it doesn't give people much incentive to work does it! - the government say they want to reduce the amount of people who just cant be bothered to work - and then they go and make low paid workers take-home pay even lower - tax the poeple who earn more more - they'll hardly notice it anyway
    • MPH80
    • By MPH80 4th Apr 08, 3:55 PM
    • 961 Posts
    • 532 Thanks
    MPH80
    yeh tell me about it - i work for the nhs and earn just under 15,000 so will be worse off with the changes, but i'm not entitled to any benefits
    Originally posted by abzie87
    Really? I ran my profile through, except changed the earnings to 15k and I was told I'd get housing benefit and council tax benefit.

    It might not apply to you if you pay less rent/council tax than me - but have a look:

    www.entitledto.co.uk

    M.
  • archived user
    On £15250 per year and taking into consideration the increased personal allowance of £5435 I have calculated that I will be "better" off to the tune of £0.30 per month. Not much use against the rising cost of everything that we have to cope with at the moment.

    Thanks to all the non voters on the mainland whose failure to vote allowed this shower of thieves to get into power.
    Last edited by Pam17; 04-04-2008 at 4:48 PM.
  • leroy953648
    This Government Absolutly Gets my Goat!!!!!

    Why Why Why do they constantly sting and penny pinch from people like me, Im single, earn 15,000 per year and lucky enough to own my own home Well (morgage) the last 2 years all i have seen is price rises, tax increases etc etc, I really thought that that was the tory governments job to sting the working class, but labour win that hands down!!!!! I really feel that my last option is to relutently vote BMP cause ive tried the rest, and neither has done me any favors.
    Lets get shot of this lying cheating government and get people in who really do care!! Not posh toffs who were educated in Eton and the likes

    Peace.
    • Paul_Herring
    • By Paul_Herring 7th Apr 08, 2:12 PM
    • 6,944 Posts
    • 3,622 Thanks
    Paul_Herring
    Lets get shot of this lying cheating government and get people in who really do care!!
    Truism: Well no matter who you vote for, the government always get elected.

    What makes you think one lot are really going to be better than another lot?

    And one other option you don't appear to know about is to actually turn up to vote but to actually spoil it - it's still counted. There was a campaign last general election about this to try and get a significant number of spoilt votes to try and make the point, but I don't think it got enough publicity.
    Conjugating the verb 'to be":
    -o I am humble -o You are attention seeking -o She is Nadine Dorries
    • alastairq
    • By alastairq 9th Apr 08, 7:47 AM
    • 4,987 Posts
    • 4,090 Thanks
    alastairq
    wow...by my calculations, with help from http://listentotaxman.com/
    I'll be a whole 26 a year better off.

    Since I work for the government anyway, and they are aiming at a meager 1.5% pay rise, I'll be worse off after the higher-than-inflation local government tax rises......

    I STRONGLY BELIEVE....all local and national taxation should be limited in rise, to NO MORE % than the national and local government projected wage rises!

    Ignoring, that is, MP's, & heads of sheds wage/allowance rises!
  • Meltdown
    Really? I ran my profile through, except changed the earnings to 15k and I was told I'd get housing benefit and council tax benefit.

    It might not apply to you if you pay less rent/council tax than me - but have a look:
    www.entitledto.co.uk
    Originally posted by MPH80
    Many benefits don't apply if you have a (relatively) small amount in the bank (for emergencies, etc).

    Yet you can own a 15M mansion in the UK, with 'old masters' on the walls, and a Ferrari/Maserati/McLaren on the driveway (or all 3), with houses in all the major capitals of the world ... AND STILL get money from the UK benefits system (if you arrange things correctly) - Go figure! :rolleyes:
    • oldagetraveller
    • By oldagetraveller 9th Apr 08, 9:14 AM
    • 3,436 Posts
    • 1,930 Thanks
    oldagetraveller
    Typically of this government, they are again robbing the "grass roots" to subsidise their rich paymasters. I will be about £200/annum worse off. Thanks Gordon.
    I am, and always have been a Socialist but New Labour (like the country we live in) have lost the plot and forget what the Labour Party originally stood for.
    R.I.P. U.K. Democracy.
    • earthmother
    • By earthmother 9th Apr 08, 9:23 AM
    • 2,535 Posts
    • 5,460 Thanks
    earthmother
    Well, hubby receives long term IB, and yesterdays payment (the first under the new figures) is lower than last fortnights (old figures).

    We won't know exactly until the next payment in two weeks time, but it looks like we've lost about £3 a week on what we were getting last year. It might not sound much, but it's a days worth of bread, spuds and milk - and over £150 a year, when the figure should have actually risen with the annual rate increase.

    As I said earlier on this thread, because of our situation there are no other benefits that will balance this loss out for us (that we are aware of), so yet another example of the lower incomed/vulnerable being hit.

    DFW Nerd no. 884 - Proud to be dealing with have dealt with my debts
  • Welsh_Adey
    I think they should have a new level at 50% for anyone who earns more than 100k a year.
  • vicshippers
    I think they should have a new level at 50% for anyone who earns more than 100k a year.
    Originally posted by Welsh_Adey
    I'm going to take a stab in the dark that you have never done any economics!
  • littlekitty
    Updated 8 April 2008

    In last year's budget, the Government announced the new income tax thresholds. This doesn't just impact what you earn, but also the rate of tax on savings and pensions too.

    The main changes.
    • The 10% starting rate has gone. The 10% income tax ‘starting rate’ will be removed for pensions and salaries, but will stay for savings.
    • Basic rate of income tax drops to 20%. Now the main level of income tax that most people pay has been cut from 22% to 20% (the cost this change is clawed back by the ending of the 10% band).
    • The ‘higher rate’ of income tax stays at 40%.
    The idea behind these changes was a simplification of the tax system and now (barring savings) there are only two bands. Sadly while this was meant to be a tax boost, those who were only paying the 10% level have lost out, meaning its some of the poorest people who will pay more tax.

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    Originally posted by MSE Wendy
    I don't know where you got your tax bands from, but they are incorrect.

    From the HM Revenue and Customs Site:



    Would be nice if higher rate was really over £41K, but it just isn't true!!
    Last edited by littlekitty; 09-04-2008 at 12:04 PM.
  • boldaslove
    on my last salary (currently jobless at the mo) which was just above the minimum wage, i would've been over 50 worse off this year i'm actually looking for part time work now as i want to study but i really think i'm going to struggle. and i'm fortunate enough to still live at home and not have student debts (yet!) so i don't have that much of a financial burdon. i'm under 25 so i can't claim working tax credits, i have absolutely no intention of having a child. why is this government always fleecing the normal hardworking people of this country? it just seems like they want a rich elite class and the rest of us to shut up and pay for their luxuries. i'm so fed up of it. i can't wait to leave, i fully intend to emigrate once i get an education and don't have any commitments. there is a ranch somewhere in mexico with my name on it

    one thing's for sure, i'm not voting labour in the general elections and i'm certainly not voting tory, so lib dems are gonna have to pull something pretty special out of the hat!!!
    if all else fails..... break out the puppy dog eyes!
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