Tax Rates and Thresholds 2011/12

The Government has published next year’s rates and thresholds for income tax, NICs, tax credits and ISAs

The Government has published the 2011/12 rates and thresholds for income tax, National Insurance contributions (NICs) and tax credits. We knew some of these already as they were announced in the June 2010 Budget.

The full Tables of Rates and Thresholds 2011/2012 are on the HM Treasury website. There is also a Written Ministerial Statement dated 2 December 2010 by David Gauke, Exchequer Secretary to the Treasury.

The key points to note for 2011/12 are:

Income tax

·      The personal tax allowance will rise by £1,000 to £7,475 (as we knew).

·      The higher allowance for those aged 65–74 and aged 75-plus will each go up by £450, to £9,940 and £10,090.

·      The income threshold above which age allowance is tapered will be £24,000 (up from £22,900 in 20010/11).

·      The higher rate income tax threshold will be £35,000 (compared to £37,400 in 2010/11)). The intention is that higher rate tax payers will not gain from the £1,000 rise in the personal tax allowance.

·      The threshold for the additional (50%) rate of income tax stays at £150,000.

·      The income at which the personal allowance begins to be clawed back remains at £100,000.

·      The 10% starting rate band for savings income will be £2,560.

National Insurance

·      The lower earnings limit for Class 1 NICs will be £102 per week.

·      The primary threshold will be £139 per week.

·      The secondary threshold for employer’s Class 1 NICs will be £817 per week.

·      Class 2 NICs rate will be £2.50 per week.

·      The small earnings exception for Class 2 will be £5,315.

·      Class 4 NICs will be due at 9% on annual profits between £7,225 and £42,475, and 2% above that.

Tax credits

·      Most tax credit elements have been indexed up by the CPI.

·      The basic element and 30-hour elements of WTC remain at £1,920 and £790 (as announced in the Comprehensive Spending Review (CSR) in October 2010).

·      The child element of CTC has been given an extra hike to £2,555 (this and the following three changes were announced in June).

·      The income disregard will be £10,000 (down from £25,000 in 2010/11).

·      The second income threshold for withdrawing tax credits will be £40,000 (down from £50,000) and the taper rate for withdrawing credits will be 41% (in place of the current first and second withdrawal rates of 39% and 6.67% respectively).

·      The baby element of CTC will be withdrawn.

·      The childcare element of WTC will be given at 70% of eligible costs (down from 80%) (as announced in the CSR).

Individual Savings Accounts (ISAs)

·      The overall investment limit is confirmed as £10,680.

·      Of which up to £5,340 can be in cash