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The government has announced significant
changes to the system of personal
allowances and tax rates for the next few
years. These mainly impact on those with
higher levels of income.
Allowances and rates
The 2009/10 personal allowance will be
£6,475. The basic rate limit will be
£37,400. Therefore an individual will pay
40% tax rather than the basic rate of 20%
when their total income exceeds £43,875.
The 10% starting rate for savings
income band (increased to £2,440) is only
available where an individual’s non
savings income (broadly earnings,
pensions, trading profits and property
income) does not exceed the starting rate
limit.
Personal allowance changes for
2010/11
From 2010/11 the personal allowance will
be subject to an income limit of £100,000.
An individual’s personal allowance will be
reduced by £1 for every £2 of gross income
they have above the income limit up to a
maximum reduction of half of the personal
allowance.
For those with income of above a second
income limit of £140,000, the amount of
their allowance will be further reduced by
£1 for every £2 above this income limit up
to a maximum of the full amount of the
personal allowance.
New tax rates for 2011/12
A new rate of income tax will be
introduced of 45%. This will apply to
taxable non savings income and savings
income above £150,000.
Dividend income is currently taxed at
10% where it falls within the basic rate
band and 32.5% where liable at the higher
rate of tax. A new rate of 37.5% will be
introduced for dividends which fall into
the income band of above £150,000.
Internet link:
HMRC personal tax changes |
