±«Óãtv

Income tax changes means low earners are losers. My daughter, with a recent Masters degree, is still seeking a position relevant to her Marketing qualification. If she earns £16,000, she will lose £4.80 a month; at £17,000 it will be a loss of £3.30; and at £18,000, the loss is £1.70.
It was already difficult for her to consider a move to a city - something of a necessity - this budget just doesn't help.
By the way, I reckon £16,000 annual gross will mean exactly £1,000 per month, after contributing 5% to a pension, income tax and NI. And, of course, costs keep rising.

How is "losing the 10% band" going to make the tax system "simpler and more logical"? He's apparently keeping the 10% band for savings income, so earned income will be taxed more heavily than unearned, and he's bound to find a way to make the actual calculation of what is taxed at what rate extremely and unnecessarily complex - this is Gordon Brown we're talking about, after all.

Is this just an attempt by Mr Brown to pay less into our pensions and less to Charities as these are always paid at the basic pension level??

So you now pay NI until £43,000 + basic allowance, ie c.£49,000?

Douglas: we don't know what the personal allowances are going to be for 2008/9 yet, so you can't make any estimates for what happens. Based on past evidence I would expect the personal allowance to rise significantly, although there are no guarantees. Still, I don't expect the changes to hurt those on lower incomes.

Evan: you've forgotten the 1% NI rate that applies from the lower earnings limit and has no upper limit - this was introduced a couple of years ago. The rates at give 11% between primary threshold and UEL, 1% above UEL.

The budget is in fact a pure sham: a headline-grabbing exercise with virtually no substance. The truth is that almost no one either gains or loses by a significant amount from the income tax changes.

Why? The lower rate of tax is increased from 10% to 20%, which could cost up to £290 per year. However, this is almost precisely offset by an increase in the threshold at which working tax credits become repayable. Lower rate taxpayers might ultimately gain by about £50 per year, which equates to a reduction in tax rates by less than 1%.

The basic rate of tax is reduced from 22% to 20%, but the rate at which working tax credits are clawed back is raised from 37% to 39%, so no-one who receives working tax credits is affected (though they still have a maginal tax rate of 70%: that is 11% NI, 20% income tax and 39% clawback of tax credits). People earning just enough not to qualify for working tax credits might be a little worse off.

The (slight) winners are those who earn just below the upper NI threshold of £34,840, who benefit from the reduction in income tax. However, after taking into account the increase in the lower rate, not by much. Their tax rate falls by less than 1%. Anyone earning more than that is then hit by the increase in the upper NI limit, so that upper rate tax-payers will be a little over £100 per year worse off - a very small percentage change.

Basically, it's what we have come to expect from New Labour, spin but no result.

NI does not stop at the Upper Earnings Limit. For many years, employees have been charged NI at 1% on earnings above the UEL, meaning that the effective 'tax rate' on earnings above the UEL is (and remains) 41%.

(NI is payable by employers on full earnings at the full rate.)

The massive Car Tax increase applies to my modest 2002 registered 2.2 litre Vauxhall Vectra which is classified as a Band G. The public is misled by the way the ±«Óãtv reported....

"The rise in VED for Band G cars - which include not only 4x4s but also some large people carriers and estate cars "

2p cut? More correct would be to point out that there is actually a 10p INCREASE in the lowest rate of tax (from 10p to 20p). Put "Brown increases tax by 10p" in your headlines!

Ah yes, alignment - such a nice sounding word. But its clear that this "alignment" is done in a typical Brown way - in other words, we'll end up paying more tax & NI as a result of it. Like paying extra NI on the difference between the old upper threshhold and the start of the higher tax bracket.

Another Brown smash and grab raid on higher earners.

Yours, Mike.

Please tell me I'm wrong, but by my calculations the adjustments to income tax mean that anybody earning more than about £18000 will pay less income tax, while anyone earning between £5225 and £18000 will pay more! (about £215 more a year for someone earning around £7500)

What happened to the old labour principles of supporting low income households?

Evan,

Income tax cuts sound good but for well run charities with taxpaying givers it's a disaster as this will reduce the charity's income by 2% the charity I'm a trustee of has just lost 5K - thanks for nothing Gordon

Does this mean that the 1% NIC above UEL up to £100,000 is being abolished?

Everyone is making a fuss over the 2p tax cut and the abolition of the 10% rate, correct me if I'm wrong, this doesn't happen until April 2008. Therefore it has no effect on what is in your pocket for another year. It would appear to have had the desired effect though, everyone is concentrating on it so much that they are ignoring everything else that he did.

Concentrate Evan, ignore the headline grabber and examine the other bits.

Ermm,

surely the alignment of NI Upper Earnings Limit with the higher rate tax threshold, actually means you will pay an extra 10% on the amount between 34840 (next year's UEL) and 43000, ie. £816 pounds per year - assuming you are a higher rate tax payer.
It also didn't say that you stop paying NI over the UEL, so presumably you continue to pay 1% over 43000.
So actually a HUGE indirect tax hike.

If she does earn that amount, the increase in tax credits will see her better off in real terms than she is today.

Evan

You say "NI will stop where the higher rate starts". Are you sure? I can't see anything that says the 1% NI currently charged above the upper earnings limit won't continue....

Evan,
Has Brown offered you a job as one of his spin doctors? Until you take it, how about some really objective analysis of this budget from the ±«Óãtv's economic editor?

The removal of the 10% band only relates to earned income and pensions. It will remain for savings income so from the practitioner's point of view it actually becomes more complicated, not simpler and more logical. When the band was introduced a drafting error, later corrected, meant that savings income was not eligible for 10% when other income was, so now the reverse appears to be true!

So giving that NI is being aligned why not go the whole hog and do the decent thing and abolish National Insurance. GB talks about efficenecy savings but why do we have two tax systems with different rules, just to allow ministers to hide tax rises under one or the other system.
I would propose a single two tier system of about 35% basic and 50% top rate starting at £10k and increasing at £50k (thats a bit finger in the air figures)
Frankly the whole budget was a pile of rubbish, he could have done far less and made the tax system much fairer. Under this government, unless you have children, you are made to pay through the nose when in fact your burden on education, the NHS, and other public sector services is normally much less.

National Insurance definitely does not stop where the higher rates start!!! Ever heard the 1% NIC..

Tax simplification, from the Chancellor who has, single handedly, doubled the size of Tolley's Tax guide.
Wake up and smell the coffee, Evan.

E N: but now the difference between the previous 40% income tax threshold of £39,825 and the new one of £43,000 will be taxed at 20%, so instead of paying income tax of £1,270 on this income, it will be £635. The net effect is that for 2007/8, the difference is your £816 less my £635, or £181.

Everyone here keeps saying Tax credit bring my wages back up. Err I'm 27 not working a full 30 hour week, I'm not disabled and I've no children.

What Tax Credit?

Gordon's very clever, raising the level for Higher Rate tax, then matching this with a raise of NI contributions to this new limit, because a lot of normal people paying into pensions get tax relief on contributions and this is at the marginal rate (40%). However, NI contributions are NOT allowable against pension contributions, so this lessens the attraction of pension saving even more.