lundi 7 mars 2011

UK 40% Higher Rate Tax Threshold Will Lower 2011

As from April 2011, the threshold at which the higher rate tax band applies will lower, from £37,401 to £35,000.
This sounds like a lot, but once you take into consideration the rise in the personal allowance, from £6,475 to £7,475, there isn't a lot of difference; take a look below.
This financial year, you could earn £43,876 (£37,401 + £6,475) without being a part of the higher rate tax band.
Next financial year, commencing 4 April 2011, you can earn £42,475 (£35,000 + £7,475) per year.
For an example of how this will affect you, see below. (Note: This is for income tax only, and does not include National Insurance Contributions)
2010-11
£50,000 - £6,475 = £43,525
£37,401 @ 20% = £7,480.20 (Lower Rate)
£43,525 - £37,401 = £6,124 (This will be taxed at 40%)
£6,124 @ 40% = £2,449.60
Total Tax = £9,929.80
Leftover = £40,070.20
2011-12
£50,000 - £7,475 = £42,525
£35,000 @ 20% = £7,000 (Lower Rate Tax)
£42,525 - £35,000 = £7,525 (This will be taxed at 40%)
£7,525 @ 40% = £3,010
Total Tax = £10,010
Leftover = £39,990
As you can see, if you were on a salary of £50,000, not including National Insurance Contributions, you will be paying £81.20 more income tax per year.
It is estimated that the lowering of the higher tax rate band will bring 750,000 more people into the higher rate band. The increase in the personal allowance will take 500,000 people out of tax altogether. On average, each household will be £200 worse off, according to the IFS.
Ben Williams works for Keepers Accountancy. To read more posts like this from the best accountants in sussex, click here. On the website, you will find an array of different blog posts, all aimed at helping you to understand the world of tax, as well as some downloadable tax helpsheets, designed to help you reduce your tax liability.