2p of Income Tax, so am I better off?

Today’s announcement that 2p will be taken off Income Tax looks good, however the BBC report that I’ll also lose the 10p band, so some back of the fag packet (excel) calculations show.

Before (according to 2007/8 figures from HMRC)
Income TaxPersonal Allowance £5,225 = £0
10p rate £2,230 = £223.00
22p rate £8,545 = £1,87.90
Total tax = £2,102.90

Now (using 20p and no 10p rate)
Personal Allowance £5,225 = £0
20p rate £10,775 = £2,155.00
Total tax = £2,155.00

Difference £52.10 worse off.

Pushing the correct buttons on Excel manage to show that a salary of £18,605 would result in no change and anything more would result in a tax cut.

Edit – OK for the time being I’m actually better off, forgetting to add my Council Allowance to these figures.

3 thoughts on “2p of Income Tax, so am I better off?

  1. Looking at this PDF I can’t see any, other than at the higher end in two years.

    A.10 From 6 April 2008, the 10 pence starting rate will be removed for earned income but
    will continue to be available for savings income and capital gains. (15)
    A.16 From 6 April 2009, the higher rate threshold will be increased by £800 above
    indexation. (21)
    A.17 From 6 April 2008, the basic rate of income tax will be reduced from 22 pence to 20
    pence. (22)

  2. A tax cut for councillors. There’s a thought!

    The devil is in the detail of tax credits, but as I noted in my post on the budget, “The budget raises taxes on low-income earners and so presumably raises the barriers to people leaving benefits and returning to work. BrownÂ’s solution is to fall back on his tried-and-tested-and-frankly-failed Tax Credits … the tax credit system is already costing £16bn and requiring 8,000 civil servants to administer. Yet last year half of the awards were wrong. Furthermore, too many of the poorest do not even claim the benefits, so complicated and obscure are they.”

    Ironically, tax credits are so complex that even if they work, they won’t save Brown, who will be seen to have raised taxes on low-income workers (which, over a decade, he has!).

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