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Introduction
Income Tax
Tax Credits and Benefits
National Insurance Contributions
Employees
Savings
Capital Gains Tax
Inheritance Tax
Corporation Tax
Business Tax
Value Added Tax
Insurance Premium Tax
Other Measures
Tax Tables
National Insurance
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Tax rates and allowances (Table A) The Chancellor has made no changes to rates and allowances for the current year to April 2011. The figures in the table are those confirmed by Alistair Darling in his March Budget. The Coalition Agreement between the Conservatives and the Liberal Democrats includes a long-term objective to take many low earners out of taxation by raising the starting point for income tax to £10,000. From 6 April 2011, the personal allowance will be raised by £1,000, significantly more than the usual inflationary rise, as a first step towards this aim. Higher rate taxpayers will not benefit from this increase: the threshold for paying higher rate tax will be reduced, after taking inflation into account, so that the overall benefit to them is the same as for a basic rate taxpayer.The extra allowance will reduce tax but the reduction in the higher rate threshold will mean that more tax is paid at 40% to compensate. The Upper Earnings Limit, at which National Insurance Contributions fall from the full rate to 1% (2% in 2011/12), will be reduced so that the threshold for higher rate tax and lower NIC is the same. Lowering the threshold therefore increases income tax but reduces NIC. As no other changes have been announced to personal allowances, the new rules which withdraw their benefit to those with incomes over £100,000 will take effect in 2010/11 as expected. For every £2 by which income exceeds £100,000, £1 will be deducted from personal allowances – so the basic allowance will be reduced to nil by the time income reaches £112,950. In this income band, the combined effect of the 40% tax rate and the withdrawal of allowances means that the marginal rate of income tax is 60%. |