The UK’s new tax rates will take effect from April 2010. Don’t panic though – for the vast majority of us, they will have no bearing whatsoever. The changes to the amount of tax that you pay will only affect those whose yearly income is more than £100,000. This year’s pre-budget report said there are plans to increase National Insurance contributions by 0.5% as of April next year but this is to coincide with an increase in the NI threshold. So, those on lower salaries won’t be negatively affected. In fact, the new tax brackets’ effect on those suffering debt problems will be minimal.
Of course, that’s probably the idea. As the UK emerges from recession, the emergency interest rate has prevented the recession from becoming a full-blown depression. Those who have suffered terribly during the credit crunch may continue to benefit from low interest rates that have now reduced the amount of interest on their secured debt. However, those struggling with unsecured debt may have found that their interest rates have increased since the onset of the credit crunch and may be considering debt solutions, like debt management, which can offer individuals in debt an easier, more affordable route out of debt.
Of course, those who have not benefited are the nation’s savers. Those with a lot of capital have seen far less return on any investment than they’ve been used to over the boom years. It is also this group that will feel the bite of the new tax bracket. There will be a new income tax band for taxable income above £150,000 a year. This will tax the highest earners at a rate of 50%. That’s a 10% increase on what their current tax band.
The second significant change to tax legislation is a reduction in the level of personal allowance. Your personal allowance is the amount of money you’re allowed to earn before having to pay tax. So, if the government reduce this allowance, they’re able to collect more tax. Again, this ruling is only set to affect high earners. That is, those who take home over £100,000 a year. In fact, for those in this situation, of every £2 they earn over £100,000 they take home only £1.20. The new tax legislation will mean that people in this pay bracket will actually take home only £0.80 of that £2.
The Chancellor has said that, as the Retail Price Index (RPI) has shown deflation over the past 12 months, we will actually be better off than we were a year ago. This is good news to those facing debt problems as it will be easier to find a serviceable solution to the burden of bad debt. Consolidating your debts without taking out a loan in the form of a debt management plan could ease the financial stress each month. You’ll only have to deal with one monthly outgoing to your debt, rather than a host of creditors. Visit www.debtconsolidation.co.uk for more information.
Well, there has to be some drawback to salaries over £100,000. Doesn’t there?
Author bio:
Debt Consolidation wrote this article about what we can expect from the amended tax brackets.