Bharat S. M. Karavadra

Tax Changes for 2010/11, and How They Affect You

Tuesday, March 9th, 2010

The new tax year starts on April 6^th 2010 and the following changes are coming up which may or may not affect your finances and planning.

Tax-free ISA savings allowance – AN INCREASE.
The new ISA allowance is £10,200, £5,100 of which can be saved in a cash ISA, meaning you can save £3000 more each year, without paying any tax on the interest.

Personal allowance – SAME – unless you’re a high earner 
The personal allowance is the amount of money you can earn before you start to pay Income Tax.

The personal allowance is held at £6475 for the under 65’s, £9490 for the 65-74’s and £9640 for the over 75’s.

Personal allowances for high earners has been reduced for those earning over £100,000 and are no more on incomes above £112,950 – basically, if you’re in this bracket you’ll pay more tax.

A 50% tax rate for earning over £150,000 – NEW
There is an introduction of a new top rate of Income Tax of 50% for those earning over £150,000.

Otherwise – SAME
A tax rate of 20% on earnings of up to £37,400 and 40% on earnings of £37,401to £150,000

Retirement and Pensions – CHANGE
The retirement age for women is increasing from 60 to 65 by 2020 which means that if you are a woman turning 60 after the 6th April 2010, the date at which you can retire and draw your state pension will not be the day of your 60th birthday.

The age at which you can access your personal pensions is increasing from 50 to 55.

National Insurance Contributions for State Pensions – LESS
You will only have to have paid National Insurance for 30 years to qualify for the full basic state pension. Currently men have to have worked for 44 years and women for 39 years.

Inheritance Tax Threshold – SAME
The threshold is remaining at £325,000.

Working and Child Tax Credits – MORE
There are some small increases in Working and Child Tax Credits from April 6^th 2010 but I’m not sure what they are, buy people on low incomes will be slightly better off.