Happy New Year! New tax year, that is. Monday 6 April 2009 marked the start of the 2009/2010 tax year for individuals. And there’s some good news on the tax front.
The personal tax allowance – the amount you can earn before you have to pay tax – rises from £6,035 to £6,475. So a basic-rate taxpayer saves £88 a year. The threshold at which higher-rate income tax kicks in has risen from £34,800 to £37,400, meaning that, taking account of the personal allowance, the starting point for higher-rate (40%) tax is now £43,875 – £3,040 higher than last year. That’s good for higher-rate taxpayers. The lower salary limit for national insurance contributions (NICs) has also increased to £4,940 a year, from £4,680, saving most lower-paid workers £28.60 a year. Higher earners aren’t so lucky. A £3,475 increase in the upper salary limit for NICs to £43,875 means those with bigger pay packets could pay up to £347.50 more a year in NICs.
Pensioners have reason to cheer the new tax year. The annual rise in the basic state pension is based on the Retail Price Index (RPI) for September 2008. So while the RPI may be at 0% now, it was 5% then. That means the basic state pension is now £95.25 a week, up from £90.70. The minimum weekly income for those aged 60 and over – paid via a ‘pension credit’ – is also up 4.8% to £130 (or £198 for couples).
Parents won’t see a change in Child Benefit this month, as it was raised in January. But the maximum Child Tax Credit – a benefit for working parents – has gone up to £2,085, which means that some parents will be up to £150 better off.
So, not a bad year – but enjoy it while it lasts. In 2011/2012, for example, high earners will suffer a personal allowance cut just as NICs rise. And there may be more pain ahead in the next budget.