Content
After U, Gordon?
Ups And Downs
Gift Horse
What A Relief!
Second Thoughts?
Last One Out...
Penalty Shoot-Out
Ain't Necessarily So
Going, Going, Gone
Papers In Order?
Death And Taxes
Passing The Buck
Hire Higher
Back Taxes, Taxes Back
Options Open
Extortion?
Sick Note
Cats And Dogs
Old-Fashioned Money
I Thee Endow?
Mother's Rights
Countdown
Nowhere To Hide
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On 6 April, the 22% rate of tax was cut to 20%, and the 10% rate was abolished for most taxpayers. The first thing many people will have noticed is an increase in pension contributions which are paid "net of basic rate tax" - in recent years, the individual has put £78 of a £100 premium into the policy, and the Revenue have contributed the other £22. Now the Revenue's contribution has fallen to £20 so the saver has to find £80. That looks like bad news, but you are supposed to celebrate paying 2% less on a great deal of income, so you will not mind having to put a little of that saving into your pension fund. The second thing to come through would be the difference in the April PAYE deductions. The 10% band applied last year to the first £2,230 of income - that now suffers twice as much tax. It's fairly easy to work out that you need to enjoy the 2% cut on five times as much - £11,150 taxed at the basic rate - before you are compensated for paying 10% more on £2,230. So the 20% rate only produced a net benefit for anyone earning £13,380 more than their personal allowance. It's possible that the April payslips were a significant reason for Labour's misery in the elections on 1 June. Apart from PAYE and pension contributions, most of the other effects of the rate changes won't come through until the 2008/09 tax returns are submitted in a year's time and the tax charges for the year are worked out. By that time, the Chancellor may have finished changing the figures! |
© Bayar Hughes & Co., 2010.