Tomorrow the new UK 2008-09 tax year starts which will bring changes in three key areas.
The National Insurance net is widening so that more people will the higher rate of NI. In contrast the basic rate of income tax is falling from 22% to 20% but the starting basic rate of 10% income tax is being scrapped.
The people who will really feel the pinch with these changes are those people on low incomes, while those on higher income will benefit the most (yes Labour are in power). For example someone earning £12,000 currently pays £1255 in income tax, while tomorrow’s regime will mean all the income will be taxed at 20% cost the tax payer an additional £139 per year.
Those people earning between about £6,000-£15,000 are bit hit the hardest because of the removal of the 10% band. In contrast those people earning over £15,000 will pay less income tax (through more of these earners will be caught in the top rate NI net). Those people earning around £34,000 will be lucky enough to receive the optimum benefits from these tax changes.
Alistair Darling argues that those people on low incomes having been penalised by these changes because they can claim or even boost their income through the system of Tax Credits. However what he fails to mention is the Tax Credit System operates at two distinct levels – Working Tax Credits (you need to be work at least 16 hours) and Child Tax Credits, if you aren’t eligible for either then, I guess it’s tough.
If you’re wondering why these changes were made, a cynic might say it was to finance the change in Capital Gains Tax thresholds, which are now 18% for everyone. Some ‘entrepreneurs’, and I’m thinking of those quasi landlords, the ‘buy-to-let’ ones, had to pay 24% on their gained capital. The Government, yes Labour, though it unfair and so thought they’d assist these ‘dynamic’ individuals by taking money from the poor.
Nevertheless there is some joy for pensioners, especially if you’re over 75 the personal allowance moves from £7690 to £9180.
Jane Kennedy Financial Secretary to the Treasury said on Radio 4 today that since 1997, the poorest 10% in the UK have seen their incomes rise by 12%, while the richest saw their income fall by 5%. And that is undoubtedly true, but 12% of £10,000 (£1,200) remains nothing in comparison to a 5% reduction of £100,000 (£5,000).
Posted by mammjtommo 