10p TAX – WINNERS AND LOSERS in the UK You should not be surprised if you see a difference in your overall net pays at the end of April 2008 as there will be winners and losers in the new tax year, which began on 6 April 2008. PricewaterhouseCoopers created a fictional family to illustrate what the new tax year might bring. One of PwC’s tax partners commented “The new tax year will bring into effect many of the changes announced in last year"s Budget. Many people will have forgotten what changes are afoot and most will not have worked out how they are affected - so the month end payslips could bring a few surprises.” The following is a fictional family to illustrate what the new tax year might bring: Winners Grandfather - Pete Pease - is 80 and has a pension of £12,000. He is £117 better off, thanks to the higher personal allowances for those aged 65+, which more than makes up for his loss of the 10% tax band. Grandson - Cooper Pease - is 28, is married and has a two year old son. His wife doesn"t work but Cooper has a salary of £27,000 from Ment Place, a recruitment agency. He is £233 better off as he gains more than enough from the 2% reduction in the basic rate of tax to still leave him in pocket after the loss of the 10% rate band. His income is not high enough to incur higher NICs. In principle he also gains from increased tax credits … but actually there is nothing left after clawback other than the standard "family element", which hasn"t altered. At least child benefit is going up by £36 p.a. Losers Father - Walter Pease - is 58 and employed by the M Bank. He has a salary of £50,000 p.a. and a company car costing £20,000 which is rated at 185 g/km, for which his employer also provides free private petrol. Walter is £97 worse off; his gains on income tax are significantly eroded by extra NICs; his car will cost him more as the benefits categories alter a little; the free fuel will cost him a good deal more and he should be checking if it is really worth having. It will get worse next year with nearly £300 p.a. extra NICs to pay. He might notice that his car tax disc will cost his employer £170 now - next year it will be £260 - at least he doesn"t have to pay this! Mother - Hope Pease - is 57 and recently took early retirement from her job. She has a pension of £6,500 and bank interest of £500. She is £86 worse off; while the continuation of the 10% rate on savings income is helpful as her income is small enough for her to qualify, she loses on the 10% income tax band and doesn"t have higher personal allowances to protect her. Daughter - Ellie Pease - is, at 21, coming to the end of her university course. She earns £8,000 a year from a part-time job, working for 25 weeks in the year, and will be £156 worse off due to the loss of the 10% band (there is a small reduction in NICs). Many low paid workers will be compensated by higher tax credits but these do not normally start until age 25. |
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