Increases in Personal Allowances, Child Benefits and Tax Credits

Changes before April 2009

• The increase in Child Benefits will be paid from 5th January 2009 instead of 6th April 2009. The new amounts will be £20.00 per week for the first or only child and £ 13.20 per week for subsequent children

Changes from April 2009

• The basic personal allowance for 2008/09 of £6035 will increase by indexation plus a further £130 to £6475 from 6 April 2009. This is equal to a weekly amount of tax free income of £116.
• The basic rate of income tax (20 per cent and higher rate 40 per cent ) remain unchanged, but the basic rate tax band is increased by indexation plus an additional £800 from £34,800 to £37,400.
• All other personal allowances, the income limit for age-related allowances, the minimum amount of married couple’s allowance and the starting rate limit for savings will be increased by indexation.
• The child element of the Child Tax Credit will increase by £75 above indexation from April 2009. This includes the extra £25 which has been brought forward from April 2010.
• Working Tax Credits and Guardians Allowance are being increased in line with indexation from April 2009.

Changes from April 2010

• The amount of basic personal allowance has not been set, but from 6 April 2010 the allowance will be subject to income limits of £100,000 and £140,000.
• This will mean that where an individual’s income is below the £100,000 income limit, they will continue to be entitled to the full allowance.
• Where an individual’s income is above the income limit of £100,000,the allowance will be reduced by £1 for every £2 above the income limit up to a maximum of one half of the basic personal allowance.
• Where an individual’s gross income is above a second income limit of £140,000, the amount of their allowance will be further reduced by £1 for every £2 above the income limit up to a maximum of the full amount of the basic personal allowance.

Changes from April 2011

• From 6 April 2011 taxable non-savings and savings income above £150,000 will be liable to income tax at a new rate 45 per cent.
• Dividends otherwise taxable at the new 45 per cent rate will be liable to income tax at a new rate of 37.5 per cent and the Trust rate will also increase to 45 per cent.
• The main rate of Class 1 and Class 4 NICs will be increased by 0.5 per cent to 11.5 per cent and 8.5 per cent respectively.
• The Class 1 employer rate of NICs will be increased by 0.5 per cent to 13.3 per cent. The increased rate will also apply to Class 1A and Class 1B contributions.
• The additional rate of Class 1 and 4 NICs will be increased by 0.5 per cent to 1.5 per cent.

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