Tax rates and Locks

Tax rates and Locks

Tue 14 Jul 2015

Leaving aside the niceties of a government feeling it necessary to impose a law on itself it is telling to consider what is and isn’t within the scope of the tax lock.

We have been told that the target is for the standard Personal Allowance to reach £12,500 by 2020, i.e. for the year 2020/21. Thereafter, unless someone else changes the legislation, the Personal Allowance will be permanently aligned with a figure equivalent to a 30-hour week at the National Minimum Wage (NMW) prescribed for a 21-year old. With this in mind the Chancellor intends to legislate to require himself (or his successor?) to consider this when setting the NMW each year.

At present the changes in rate bands that have been ordained so far are:

Year Standard personal allowance 20% Basic rate band 40% Higher rate threshold 45% Additional rate on income over

 

£

£

£

£

2015/16

10,600

31,785

42,385

150,000

2016/17

11,000

32,000

43,000

150,000

2017/18

11,200

32,400

43,600

150,000

Income tax on dividends >5k

7.5%

32.5%

38.1%

 The locked taxes

The tax lock, to be legislated in the Summer Finance Bill is to apply for the duration of the present Parliament and prevent increases in:

England, Wales and Northern Ireland in

·         the main rates of income tax, NICs and VAT above their current (2015/16) levels;
·         the standard (20%) and reduced (5%) rates of VAT;
·         employer and employee Class 1 NICs rates; and
·         the NICs upper earnings limit above the income tax higher rate threshold.

and throughout the UK on

·         savings income; and
·         VAT zero and reduced rated items by removal from those rates.

 

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