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Income tax
Following the compensation arrangements arising from the
abolition of the 10% rate band, the Government will make
permanent the £600 increase in the personal allowance with a
further increase of £130 above indexation, meaning basic rate
taxpayers pay £145 less a year in tax in 2009/10.
The basic rate limit for 2009/10 will be increased by £800 above
indexation. The Chancellor announced the tax thresholds and
personal allowances for 2009/10 as follows:
INCOME TAX 2008/09 2009/10
Starting rate band* £2,320 £2,440
Tax rate 10% 10%
Basic rate band £34,800 £37,400
Tax rate 20% 20%
Basic rate for dividend income 10% 10%
Higher rate - income over £34,800 £37.400
Tax rate 40% 40%
Higher rate for dividend income 32.5% 32.5%
Personal Allowances (Age at the end of the tax year)
Under 65 £6,035 £6,475
65 - 74 £9,030 £9,490
75 and over £9,180 £9,640
Higher allowances scaled
back if income exceeds £21,800 £22,900
From 2010/11, those with gross income in excess of £100,000 will lose some or all of their personal allowances. The basic allowance will be scaled back in two stages:
1. where gross income is between £100,000 and £140,000, to a minimum of 50%, and
2. where gross income exceeds £140,000, to a minimum of £0.
The scaling will be achieved by reducing the allowance by £1 for every £2 by which gross income exceeds the £100,000 and £140,000 thresholds.
Announced for 2011/12 are new higher rates of tax:
for those with higher incomes, a tax rate of 45% will apply to savings and non-savings income over £150,000
a new 37.5% rate of tax will apply to taxable dividend income above £150,000
the rate of tax for trusts will be increased to 45%, with trust dividend income liable at 37.5%.
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