The Salary Calculator

Pre-budget report

by Admin

Earlier this week the Chancellor of the Exchequer gave his pre-budget report, which gives us a preview of what he will announce in next year’s budget. For personal income, there were a couple of things to note. Firstly, the personal allowance (the amount that everyone can earn without paying income tax) is not increasing as it normally does in April 2010, and nor are the thresholds for National Insurance contributions. The Chancellor says that this is because the Retail Price Index (RPI) shows that deflation over the past 12 months means that in real terms we will be better off than a year ago even without the usual increase.

As already announced, there will be a new higher tax rate of 50% for income over £150,000, and personal allowances will be reduced gradually to zero for those earning over £100,000 (by £1 for every £2 earned over this limit).

The Salary Calculator will be updated with these details early in 2010, but as you can see, only those earning over £100,000 will find their take-home pay changing in April 2010. Everyone else will have the same personal allowances and the same tax and NI rates, so take-home will remain as before.

However, there was also news in this pre-budget report that there are plans to increase National Insurance contributions by 0.5% from April 2011, but also to raise the NI threshold so that those on lower salaries are not negatively affected. The details are not yet clear (and of course, there is an election between now and then so it may not come to pass) but whatever the changes for 2011 turn out to be, The Salary Calculator will be updated at that time.

Tags: 50% tax, April 2010, election, income tax, Pay As You Earn, personal allowance, tax rates, The Salary Calculator