One of the major income tax announcements last month was the proposed increase in income tax and National Insurance rates for high income earners. A quick summary follows.
- 2009/10 – No change for this tax year!
- 2010/11 – If your earnings are between £100,000 and £140,000 you will lose one-half of your personal allowance. If your earnings exceed £140,000 you will gradually lose the remainder of your personal allowance.
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.
HMRC have now issued further guidance on the increase in the personal tax allowance which is due to take effect from 7 September 2008.
The guidance is aimed at both employers and employees. Although the increase takes effect for pay dates from 7 September onwards the change will effectively be backdated for the majority of individuals until the beginning of the tax year.