2008 Pre-Budget Report (PBR) Personal Tax, Child Benefit and Tax Credit

Changes before April 2009

The increase in Child Benefits will be paid from 5 January 2009 instead of 6 April 2009. The new amounts will be £20.00 per week for the first or only child and £ 13.20 per week for subsequent children

The basic personal allowance for 2008-09 of £6,035 will increase by indexation £310 plus a further £130 to £6,475 from 6 April 2009. This is equal to a weekly amount of tax free income of £125.
The basic rate of income tax (20 per cent and higher rate 40 per cent ) remain unchanged, but the basic rate tax band is increased by indexation plus an additional £800 from £34,800 to £37,400.
All other personal allowances, the income limit for age-related allowances, the minimum amount of married couple’s allowance and the starting rate limit for savings will be increased by indexation.
The child element of the Child Tax Credit will increase by £75 above indexation from April 2009. This includes the extra £25 which has been brought forward from April 2010.
Working Tax Credits and Guardians Allowance are being increased in line with indexation from April 2009.

The amount of basic personal allowance has not been set, but from 6 April 2010 the allowance will be subject to income limits of £100,000 and £140,000.
This will mean that where an individual’s income is below the £100,000 income limit, they will continue to be entitled to the full allowance.
Where an individual’s income is above the income limit of £100,000,the allowance will be reduced by £1 for every £2 above the income limit up to a maximum of one half of the basic personal allowance.
Where an individual’s gross income is above a second income limit of £140,000, the amount of their allowance will be further reduced by £1 for every £2 above the income limit up to a maximum of the full amount of the basic personal allowance.

From 6 April 2011 taxable non-savings and savings income above £150,000 will be liable to income tax at a new rate 45 per cent.
Dividends otherwise taxable at the new 45 per cent rate will be liable to income tax at a new rate of 37.5 per cent and the trust rate will also increase to 45 per cent.
The main rate of Class 1 and Class 4 National Insurance contributions will be increased by 0.5 per cent to 11.5 per cent and 8.5 per cent respectively.
The Class 1 employer rate of National Insurance contributions will be increased by 0.5 per cent to 13.3 per cent. The increased rate will also apply to Class 1A and Class 1B contributions.
The additional rate of Class 1 and 4 National Insurance contributions will be increased by 0.5 per cent to 1.5 per cent.

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