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It’s all a balancing act

Yesterday, the Chancellor announced changes to the personal tax system in response to the furore over the abolition of the 10p rate of tax. Gordon Brown's "prudence" concept seems to have been abandoned as, in his new role, he has to balance the polls rather than the books. The government is apparently borrowing £2.7 billion to fund a tax cut that is much broader in scope than simply addressing those affected by the loss of the 10p rate.

The personal allowance for the current is being increased by £600 to £6,035. So far so good - but then the basic rate band is being correspondingly reduced by £1,200 to £34,800. This means that anyone paying tax at the higher rate will no see no difference whatsoever in the amount of tax they pay. Individuals paying tax at basic rate will receive an extra £120 pa.

The full text of the Chancellor’s announcement is available on HM Treasury’s website

What is concerning is the lack of comment on national insurance bearing in mind the government's stated policy of aligning income tax and NIC payment rates. Watch this space.

 

 

Date: 14th May, 2008
Author: Cathy Corns

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