Pre-Budget Report

November 15th, 2008

The following is a brief overview of the main tax changes announced in the 2008 Pre-Budget Report and the dates they will take effect.

A new rate of VAT on the sale of standard rated goods and services of 15%.  This rate remains until 31st December 2009, when it will revert to 17.5%.

Date of change: 1st December 2008

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The personal tax allowance increases to £6,475 and the basic rate tax limit to £37,400.  Assuming entitlement to a full allowance you can therefore earn £43,875 in the tax year 2009/10 before paying higher rate tax.

Date of change: April 2009

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Full basic personal allowance available to individuals with gross income under £100,000, for individuals with gross income over £100,000 the basic personal allowance will be reduced by £1 for every £2 over this amount (with a maximum reduction of 50%). If gross income is above £140,000 the basic personal allowance will be further reduced at the same rate up to the maximum of the full basic personal allowance.

Date of change: April 2010

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Taxable non-savings and savings income above £150,000 will be liable to Income Tax at a new rate of 45%.

Class 1 and Class 4 National Insurance Contributions (NICs) will increase by 0.5% to 11.5% and 8.5% respectively.  The Class 1 employer rate of NICs will be increased by 0.5% to 13.3%.  The increased rate will also apply to Class 1A and Class 1B contributions.  The additional rate of Class 1 and 4 NICs will be increased by 0.5% to 1.5%.

There will be three rates of tax for dividends.  Dividends taxed at the basic and higher rate will continue to be taxed at 10% and 32.5% respectively. Dividends otherwise taxable at the new 45% rate will be liable to income Tax at the new rate of 37.5%.  The dividend trust rate and the trust rate of tax will be increased to 37.5% and 45% respectively.

Date of change April 2011