Personal Tax - Nov 2008

Income tax
The rates and thresholds of income tax have been set for 2009/10 as follows:

Savings rate (on Savings income only) - 10%: £0 - £2,440
Basic Rate - 20%: £0 - £37,400
Higher Rate - 40%: Over £37,400

However, an additional higher tax rate of 45% is promised from 6 April 2011 for those with total income above £150,000. These individuals will also lose the benefit of the personal allowance (see below). The rates paid by Trusts will also increase to 37.5% for dividends and 45% for other income from 6 April 2011.

Personal Allowances
In May 2008 the Chancellor increased the basic personal allowance to compensate lower earners for the loss of the 10% tax threshold. This increase is carried forward into 2009/10.

There is a cap on the benefit of the personal allowances given to those aged over 64 where their income exceeds the income limit. A similar mechanism of reducing the benefit of the personal allowance is proposed for those with total income over the thresholds of £100,000 and £140,000 in 2010/11 and beyond.

Pension Contributions
The lifetime and annual allowance for pension contributions were set for the five years from 2006/07 to 2010/11. These allowances will now be frozen at the 2010/11 rates until at least 2015/16, which will restrict the tax relief available to very high earners:

- Life time allowance: £1.8 million
- Annual allowance: £255,000