Abolition of the 10% Tax Band and reduction of Standard rate to 20% [Merged]

A question about : Abolition of the 10% Tax Band and reduction of Standard rate to 20% [Merged]

I was just curious as to who would be adversely affected by the abolotion of the starting rate band next year?

Assume someone earning National Minimum Wage of Ј5.52/hour, working 37 hours per week, total annual income of Ј10,620.

Total tax bill 2007-08 is Ј919.
Total tax bill 2008-09 will be Ј1,037.
An increase of Ј118.

Assume someone Ј13.44/hour, working 37 hours per week, total annual income of Ј36,341.

Total tax bill 2007-08 is Ј6,577.
Total tax bill 2008-09 will be Ј6,181.
A decrease of Ј396.

The threshold at which the new rates become beneficial seems to be around the Ј16,500 mark. The government reckons changes to the Tax Credit system will offset any increased tax paid by low earners, but that assumes that people either have children or are aged 25 and working 30 hours or more per week.

It would seem that those hardest hit by the new tax rates will be the young and childless, quite a large group of people I'd have thought.

Best answers:

• It was said at the time that any single person earning less than £18,000 would pay more in tax.
  That would have been me, but I now have a 2nd income I am building up online, which is growing, so the combination of my earned pay for an employer and my extra online earnings come to more than this. Thank goodness.
  I started building a second income online as I've spent years in/out of work - always at the "mercy" of poor paying employers. So decided rather than continuing in my boom/bust I'd build something up myself, expecting it to take 3-4 years to equal my full-time earnings.... that way I could work and my other earnings are a "welcome bonus", but each time I find myself "between jobs" I am not in any panic any more to suddenly find the next person that will give me a job/any job. Which invariably was at less money as you take the first thing you're offered.
  One year on and it is making that difference already and instead of being a few grand under that £18k, I'm now a few grand over it.
• The simplest thing to do, which would have made no one worse off would have been to raise the personal allowance by a minimum of half the 10% band. This would mean the upper half that was in the 10% would fall into 20% band and come out the same.
  If this was too expesive for the treasury (???!!!) as it would benefit everyone, the basic rate tax could have been left alone or perhaps the 20% kept but the 40% threshold reduced by the apporpriate amount to account for the rise in allowance
• See:-
  https://forums.moneysavingexpert.com/....html?t=581356
  jh
• It will affect me.
  I earn about the single person's allowance.
  But I also have building society interest, taxed at source at 20%.
  In previous years I have been able to reclaim the full 10% banding from this - I think its about Ј2000 - so my rebate has been 10% of Ј2000 - about Ј200.
  This is going to disappear. I have not seen this situation mentioned elsewhere but believe it will be quite common.
• Good news, the 10% band remains for investment income only, so your annual rebate will still be there.
• Yes you are correct.
• I don't know if this has been raised before but I'll remind you again anyway.
  Low earners (less than 19k) will have to pay more tax next year from april because of the abolition of the 10p tax band. I'm getting more and more angry about this. Why is Brown penalising low earners like this?
  is it too late? Is there anything we can do (like the business leaders who are protesting about abolition of taper relief)?
  Makes you want to give up working....
• This was mentioned in a BBC 2 "Working Lunch" programme several months ago. It will not only affect people in employment but will also hit several million retired people receiving pensions from their former employers.
  Might be a good idea to go to the www.bbc.co.uk/workinglunch/ website and send in comments, in the hope that they might re-visit their earlier coverage of this.
  Their Producer is Tracey Hobbs.
  CSL
  Wednesday 21st November 2007
• Pam17
  Apologies, you are quite right.
  I should have said, "but will also hit several million receiving pensions from former employers".
  Will now correct my my original post
  CSL
• I worry about the people who are unaware and will just blame their employers when they get their april 08 payslips.
  My calculations show that someone on 10k will be approx Ј172 worse off per year. Thats about 14 quid a month!
  I 'm an adviser I know we'll get loads of calls come next financial year from workers complaining and thinking the employer has cut their pay!
  I'm fuming as it affects me too!
• Oooh, thanks for that Dunstonh,
  I am a pension fund trustee and I guess this is something we should mention at our next meeting.
• thanks for the reminder op
  I don't know what to do, it just does not seem fair somehow
  is Gordon Brown trying to put people off working or something?? :confused:
• Wasn't there some claim at the time that increased WTCs are susposed to make up for the loss?