Friday, 16 May 2008

This 10p tax thing

Having read the message from the McChattanooga choo-choo, it struck me that I hadn't had much of a look at the decision to do in the 10p tax rate. Right then:

Last year the personal allowance was £5,225. After that, the first £2,230 was taxed at 10% and the next £32, 370 at 22%, anything over that taxed at 40%.

So someone who earned £7,455 would have paid £223 in tax for the full year.

In the budget the threshold was raised to £5,435, the 10% rate was abolished, the 22% rate was cut by 2 points and the stepping point between the basic rate (20%) and higher rate (40%) went up £1,400.

Our low-paid worker on £7,455 saw their tax bill go up to £404 - an increase of £181 or just over 81% in their tax bill

Darling brought in a one-year deal (which he borrowed to fund), increasing the personal allowance by £600 to £6,035 - that saves every basic rate taxpayer £120 a year.

Our low-paid worker's tax has gone back down a bit to £284 - £61 more than they were paying last year - an increase of 27.35%. That's still some tax hike, and next year there could be even more unless Darling finds another £2.7bn.
Just for interest's sake - the break-even point is £10,505, so when Darling said that there was only 1.1 million households that wouldn't get full recompense what he forgot to tell us that it was the very poorest families that would still lose out. Still, it's only 1.1 million households, isn't it? How many people are there in 1.1 million households?

Meanwhile, let's have a look at someone earning, say, £39,825. Last year they would have paid £7,344.18 in tax, the budget brought their tax bill down to £6,878, and this deal brings their tax bill down to £6,758 - a saving of £586.18 or 8%.

Let's reprise:
Earnings of £7,455 - tax up by £61
Earnings of £39,825 - tax down by £586.18

Douglas Alexander, while in opposition, said that poverty was a scar on the face of the nation. I wonder what Gordon Brown will be saying when he addresses the General Assembly of the Church of Scotland tomorrow? "Poverty's fine as long as it's not my target group of voters who's suffering"?


Anonymous said...

On a purely personal level, I'm liking your figures, but it still isn't going to make me vote Labour

McChatterer said...

It's the fact it is only for one year that scunners me. It's a temporary measure, a steak thrown to the dogs so the trail goes cold by the time they're done chewing.

But we'll see if people have forgotten in 2009.