Higher Rate Taxpayers
Due to the recession the policy of the Government has been to raise taxes to raise further income for the economy.
This article looks at the effect of those changes and how it affects different taxpayers.
There has been a straight increase in the rate of VAT from 17.
5% to 20%.
For Income tax the increases had already been announced leading to rates of 50% and 60%.
In the recent budget announcements there is always a statement explaining the effect of the tax changes.
Those changes that came into force from 6th April have had a greater impact than HMRC said they would according to their recently released figures.
Taxpayers already paying tax at 40% were well aware of the changes that would lead to tax at 50% and the effective rate of 60%.
There are now some 3.
74 million higher-rate taxpayers.
The budget measurers have accounted for a further 630,000.
There is no rate of 60% whereas 50% is payable on incomes of over £150,000.
The personal allowance was already removed for taxpayers with an income of £100,000 which gave rise to the effective rate of 60%.
It is always desirable to not only have tax payable by those that can afford the higher rates but to take out of the tax net those taxpayers on low incomes.
The personal allowance was increased for this year by £1,000 from £6,475 to £7,475 which in the budget was estimated would take some 800,000 people out of paying tax.
According to the recent figures from HMRC 600,000 will now be relieved of their tax burden.
It was seen that if the personal allowance was increased the higher rate taxpayers would benefit as well.
To avoid that the threshold at which tax at 40% became payable was reduced by £2,500 from £37,400 to £34,900.
This means that with the addition of the personal allowance the point at which tax at 40% becomes payable has been reduced from £43,875 to £42,375.
That is the reason for there being 630,000 more taxpayers paying tax at the 40% rate.
The overall result of this is that taxpayers with incomes between £30,000 and £50,000 will pay an extra £2.
9 billion to the exchequer which is a total of £7.
87 billion as against £4.
97 billion previously.
This article looks at the effect of those changes and how it affects different taxpayers.
There has been a straight increase in the rate of VAT from 17.
5% to 20%.
For Income tax the increases had already been announced leading to rates of 50% and 60%.
In the recent budget announcements there is always a statement explaining the effect of the tax changes.
Those changes that came into force from 6th April have had a greater impact than HMRC said they would according to their recently released figures.
Taxpayers already paying tax at 40% were well aware of the changes that would lead to tax at 50% and the effective rate of 60%.
There are now some 3.
74 million higher-rate taxpayers.
The budget measurers have accounted for a further 630,000.
There is no rate of 60% whereas 50% is payable on incomes of over £150,000.
The personal allowance was already removed for taxpayers with an income of £100,000 which gave rise to the effective rate of 60%.
It is always desirable to not only have tax payable by those that can afford the higher rates but to take out of the tax net those taxpayers on low incomes.
The personal allowance was increased for this year by £1,000 from £6,475 to £7,475 which in the budget was estimated would take some 800,000 people out of paying tax.
According to the recent figures from HMRC 600,000 will now be relieved of their tax burden.
It was seen that if the personal allowance was increased the higher rate taxpayers would benefit as well.
To avoid that the threshold at which tax at 40% became payable was reduced by £2,500 from £37,400 to £34,900.
This means that with the addition of the personal allowance the point at which tax at 40% becomes payable has been reduced from £43,875 to £42,375.
That is the reason for there being 630,000 more taxpayers paying tax at the 40% rate.
The overall result of this is that taxpayers with incomes between £30,000 and £50,000 will pay an extra £2.
9 billion to the exchequer which is a total of £7.
87 billion as against £4.
97 billion previously.