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10p tax changes - what does this mean for you?

22 September 2008

There has been a lot of talk about the 10p tax changes which affect our September pay packets. In this current climate of high prices, even a small change is important.

Any change in tax will also mean a change to tax credits for those who claim them, so any information we give can only be general.

The abolition of the 10p starting rate of income tax means that for those on a low income the money they previously paid at the 10p tax rate either falls below the personal allowance threshold of £6,035 or is taxed at the new starting rate of 20% (down from 22%).

The Chancellor claims 600,000 people on low incomes will be taken out of tax altogether. He also claims 80% of those who lose out will be fully compensated and the remaining 20% compensated by at least half.

The tax credit system should mean that those who claim won’t lose out, some may actually gain overall. However, not everyone can or does claim.

Those who will lose out are:

  • Childless single adults under 25
  • Childless adults who work less than 30hrs pw.
  • Those who are entitled but don’t claim tax credits (only 19% of families without children take up their working tax credit entitlement).                                                                                         

Some of those who previously paid 22% tax stand to make a small gain due to the fall in the standard rate to 20%. Winners will usually include those who earn between £18,500 and the higher rate tax threshold.

The higher rate tax payer will find the threshold has fallen from £36,000 to £34,500 for the 40% tax band, but the change to the lower threshold offsets this so people should see no change in the tax they pay.

You can find out more the changes here. Make sure you have your payslip with your tax code handy so you can see how you will be affected.

Tax Credits

Nine in 10 families with children are entitled to tax credits but many don’t take up their entitlement. Single adults over 25 who are working full time may also be eligible.

A TUC guide to tax credits is available to download here or contact Jannet in our pay unit on jannet@pcs.org.uk for a copy.

For more information check out the HMRC tax credit website, call
the HMRC helpline on 0845 300 3900 or the Working Families free helpline 0800 013 0313

Reps who want a copy of a workplace poster advertising this information should contact PCS's equality department on 020 7801 2683 or on equality@pcs.org.uk

 

 

 

 

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