31.01.2011 - Tax Threshold 2011 - 40% Higher Rate Tax Threshold Lowered
Posted by Ben Williams on Mon, Jan 31, 2011 @ 04:27 AM
As from April 2011, the Tax Threshold 2011 at which the higher rate tax band applies will lower, from £37,401 to £35,000.
This sounds like a lot, but once you take into consideration the rise in the personal allowance, from £6,475 to £7,475, there isn't a lot of difference; take a look below.
This financial year, you could earn £43,876 (£37,401 + £6,475) without going over the higher rate tax threshold 2011.
Next financial year, commencing 4 April 2011, you can earn £42,475 (£35,000 + £7,475) per year.
For an example of how this will affect you, see below. (Note: This is for income tax 2011 only, and does not include National Insurance Contributions)
2010-11
£50,000 - £6,475 = £43,525
£37,401 @ 20% = £7,480.20 (Lower Rate Tax)
£43,525 - £37,401 = £6,124 (This will be taxed at high rate)
£6,124 @ 40% = £2,449.60
Total Tax = £9,929.80
Leftover = £40,070.20
2011-12
£50,000 - £7,475 = £42,525
£35,000 @ 20% = £7,000 (Lower Rate Tax)
£42,525 - £35,000 = £7,525 (This will be taxed at the high rate)
£7,525 @ 40% = £3,010
Total Tax = £10,010
Leftover = £39,990
As you can see, if you were on a salary of £50,000, not including National Insurance Contributions, you will be paying £81.20 more income tax per year, due to the lowering of the 40% tax threshold.
It is estimated that the lowering of the higher tax rate band will bring 750,000 more people into the higher rate band. The increase in the personal allowance will take 500,000 people out of tax altogether. On average, each household will be £200 worse off, according to the IFS.
Learn more about the 40% Tax Threshold 2011 and more...
To learn more about the High Rate Tax Threshold, Tax Thresholds 2011, Rates & Allowances for 2011/12, click here to read our 'Income Tax & National Insurance Rates for 2011-12' Blog post. OR, have a look at an example of how the changes could affect you;
Tax Thresholds 2011/12 - How Will The Changes Affect Me?
Or, if you have any questions, you can use our completely free Ask an Accountant service.
