| We live in quite amazing
times in the world of tax. Over a year
ago, in Gordon Brown’s last Budget speech
as Chancellor, the so-called ‘abolition’
of the 10% starting rate was announced.
The government’s reason for this was, and
still remains, the simplification of the
tax system.
Of course, the 10% rate hasn’t been
‘abolished’, it merely does not apply to
all forms of income anymore. The income it
may still apply to, depending on your
circumstances, is savings and dividend
income but not pension, earned, property
and other income.
It became clear that, if earnings were
taxed at 20% basic rate and not the old
10% rate, there would be many losers –
around 5 million of them, unfortunately
most of them being the lowest earners in
the country.
So, following extensive media coverage,
and potentially faced with a back-bench
revolt and the possibility that the
Finance Bill would be compromised, the new
Chancellor Alistair Darling has announced
- an increase in the personal
allowance of £600, from £5,435 to
£6,035; and
- a reduction in the basic rate limit
of £1,200, from £36,000 to £34,800.
These changes mean that basic rate
taxpayers will benefit by £120 per tax
year whilst the position of higher rate
taxpayers will be unchanged.
Provisional announcements indicate that
the changes will not take effect for
employees until September.
Internet link:
BBC website |
