UK 2008-09 Income Tax Allowances, National Insurance Contributions, Child and Working Tax Credit Rates
Personal_Finance / UK Tax & Budget Oct 25, 2007 - 10:31 AMBy: Sarah_Jones
The UK Government's published 2008-09 rates and allowances for Income Tax, National Insurance Contributions, Working and Child Tax Credits, Child Benefit/Guardian's Allowance and State Pension and Pension Credit. These are set out below. Rates for other benefits will be announced later this year by the Secretary of State for Work and Pensions.
Income tax
£ per year (unless stated) |
2007-08 | Change | 2008-09 |
| Income tax personal and age-related allowances | |||
| Personal allowance (age under 65) | £5,225 | +£210 | £5,435 |
| Personal allowance (age 65-74) | £7,550 | +£1,480 | £9,030 |
| Personal allowance (age 75 and over) | £7,690 | +£1,490 | £9,180 |
| Married couple's allowance* (aged less than 75 and born before 6th April 1935) | £6,285 | +£250 | £6,535 |
| Married couple's allowance* (age 75 and over) | £6,365 | +£260 | £6,625 |
| Married couple's allowance* - minimum amount | £2,440 | +£100 | £2,540 |
| Income limit for age-related allowances | £20,900 | +£900 | £21,800 |
| Blind person's allowance | £1,730 | +£70 | £1,800 |
| Pension schemes allowances | |||
| Annual Allowance | £225,000 | +£10,000 | £235,000 |
| Lifetime Allowance | £1,600,000 | +£50,000 | £1,650,000 |
*Married couple's allowance is given at the rate of 10 per cent.
National insurance contributions
£ per week (unless stated) |
2007-08 | Change | 2008-09 |
| Lower earnings limit, primary Class 1 | £87 | +£3 | £90 |
| Upper earnings limit, primary Class 1 | £670 | +£100 | £770 |
| Primary threshold | £100 | +£5 | £105 |
| Secondary threshold | £100 | +£5 | £105 |
| Employees' primary Class 1 rate between primary threshold and upper earnings limit | 11% | - | 11% |
| Employees' primary Class 1 rate above upper earnings limit | 1% | - | 1% |
| Employees' contracted-out rebate - salary-related schemes | 1.6% | - | 1.6% |
| Employees' contracted-out rebate - money-purchase schemes | 1.6% | - | 1.6% |
| Married women's reduced rate between primary threshold and upper earnings limit | 4.85% | - | 4.85% |
| Married women's rate above upper earnings limit | 1% | - | 1% |
| Employers' secondary Class 1 rate above secondary threshold | 12.8% | - | 12.8% |
| Employers' contracted-out rebate, salary-related schemes | 3.7% | - | 3.7% |
| Employers' contracted-out rebate, money-purchase schemes | 1.4% | - | 1.4% |
| Class 2 rate (per week) | £2.20 | +£0.10 | £2.30 |
| Class 2 small earnings exception | £4,635 per year | +£190 | £4,825 per year |
| Special Class 2 rate for share fishermen (per week) | £2.85 | +0.10 | £2.95 |
| Special Class 2 rate for volunteer development workers | £4.35 | +£0.15 | £4.50 |
| Class 3 rate (per week) | £7.80 | £0.30 | £8.10 |
| Class 4 lower profits limit | £5,225 per year | +£210 | £5,435 per year |
| Class 4 upper profits limit | £34,840 per year | +£5,200 | £40,040 per year |
| Class 4 rate between lower profits limit and upper profits limit | 8% | - | 8% |
| Class 4 rate above upper profits limit | 1% | - | 1% |
Working and Child Tax Credits rates
£ per year (unless stated) |
2007-08 | Change | 2008-09 |
| Working Tax Credit | |||
| Basic element | £1,730 | +£70 | £1,800 |
| Couple and lone parent element | £1,700 | +£70 | £1,770 |
| 30 hour element | £705 | +£30 | £735 |
| Disabled worker element | £2,310 | +£95 | £2,405 |
| Severe disability element | £980 | +£40 | £1,020 |
| 50+ Return to work payment (16-29 hours) | £1,185 | +£50 | £1,235 |
| 50+ Return to work payment (30+ hours) | £1,770 | +£70 | £1,840 |
| Childcare element of the Working Tax Credit | |||
| Maximum eligible cost for one child | £175 per week | - | £175 per week |
| Maximum eligible cost for two or more children | £300 per week | - | £300 per week |
| Percentage of eligible costs covered | 80% | - | 80% |
| Child Tax Credit | |||
| Family element | £545 | - | £545 |
| Family element, baby addition | £545 | - | £545 |
| Child element | £1,845 | +£240 | £2,085 |
| Disabled child element | £2,440 | +£100 | £2,540 |
| Severely disabled child element | £980 | +£40 | £1,020 |
| Income thresholds and withdrawal rates | |||
| First income threshold | £5,220 | +£1,200 | £6,420 |
| First withdrawal rate (per cent) | 37% | +2% | 39% |
| Second income threshold | £50,000 | - | £50,000 |
| Second withdrawal rate (per cent) | 6.67% | - | 6.67% |
| First threshold for those entitled to Child Tax Credit only | £14,495 | +£1,080 | £15,575 |
| Income disregard | £25,000 | - | £25,000 |
Child Benefit/Guardian's Allowance Rates
£ per week (unless stated) |
2007-08 | Change | 2008-09 |
| Eldest/Only Child | £18.10 | +£0.70 | £18.80 |
| Other Children | £12.10 | +£0.45 | £12.55 |
| Guardian's Allowance | £12.95 | +£0.50 | £13.45 |
State Pension / Pension Credit
£ per week (unless stated) |
2007-08 | Change | 2008-09 |
| State Pension | |||
| Category A or B basic pension | £87.30 | +£3.40 | £90.70 |
| Category B basic pension (lower) – husband's insurance | £52.30 | +£2.05 | £54.35 |
| Category C or D – non-contributory | £52.30 | +£2.05 | £54.35 |
| Pension Credit | |||
| Standard minimum guarantee – single | £119.05 | +£5.00 | £124.05 |
| Standard minimum guarantee – couple | £181.70 | +£7.65 | £189.35 |
Details
Income tax rates and allowances
All income tax allowances will be increased in line with inflation. The personal allowance will increase to £5,435.
As announced at Budget 2007 the age related allowance has been raised by £1,180 above inflation to £9,030 for people aged between 65 and 74 and to £9,180 for those aged 75 and over. This will mean that in 2008-09 no one aged 65 or over need pay tax on an income of up to £173 a week. Around half of all pensioners pay no tax on their income.
National insurance contributions
The starting point for employers', employees' and self-employed NICs in 2008-09 will increase in line with inflation to £105 per week. NICs are not paid on earnings or profits below this amount. The upper earnings and profits limits for NICs will increase from 2008 from £670 to £770 per week. For the self-employed, the rate of Class 2 contributions will increase to £2.30 per week.
Employers' and employees' contributions
In line with the Social Security Contributions and Benefits Act 1992, the lower earnings limit for employees' Class 1 contributions is to be raised to £90 a week. It is set at the level of the basic state pension for a single person from April 2008, rounded down to the nearest pound. This is the lowest level of earnings that can count towards entitlement to contributory benefits.
The primary and secondary thresholds for Class 1 contributions will increase in line with inflation to £105 a week, the same as the weekly amount of the income tax personal allowance. This means that employees will pay no tax and employers and employees will pay Class 1 contributions on earnings below this level.
The upper earnings limit for employee's Class 1 contributions will be raised to £770 a week.
The standard main rate of employees' Class 1 contributions below the upper earnings limit will continue to be 11 per cent, and above the limit the rate will continue to be 1 per cent.
The standard rate of employers' Class 1 contributions will continue to be 12.8 per cent.
The self-employed
The flat rate of Class 2 contributions will increase to £2.30 a week. Those with earnings below the annual small earnings exception can apply to be exempted from paying Class 2 contributions; this limit will be raised to £4,825.
The annual lower profits limit for Class 4 contributions will increase in line with inflation to £5,435.
The upper profits limit for Class 4 contributions will be raised to £40,040, to maintain the link with employees' earnings liable to Class 1 contributions at the main rate.
The self-employed will pay Class 4 contributions on all their profits above the lower profits limit. The rate of Class 4 contributions will continue to be 8 per cent on profits below the upper profits limit, and 1 per cent on profits above that limit.
Child and Working Tax Credits rates and Child Benefit
Child Benefit is raised in line with inflation.
The child element of Child Tax Credit (CTC) increases by £175 above average earnings indexation. The disabled child element and severely disabled elements rise with inflation. The family element (normal and baby addition) remains frozen at £545 per year. The income threshold for CTC only rises to £15,575 per year. The income threshold for CTC family element only remains at £50,000 per year.
The maximum eligible childcare costs remains at £175 for one child and £300 for two or more children. The percentage of eligible childcare costs remains at 80 per cent.
The disregard in Tax Credits for increases in income between one tax year and the next remains at £25,000.
State Pension and Pension Credit
The basic State Pension is raised in line with inflation. This means any individual entitled to a full basic State Pension will receive £90.70 in 2008/09. Married women can receive a Category B (lower) pension based solely on the pension entitlement of their husband – so, for example, a couple consisting of a woman with no entitlement of her own, and a man with full basic State Pension entitlement would receive £145.05.
The Pension Credit standard minimum guarantee is raised by 4.2%, honouring the commitment made at Budget 2007 to uprate in line with earnings growth as forecast at that time.
Tax Credits
Section 41 of the Tax Credits Act requires a report to be laid before Parliament each year reviewing the amounts of certain tax credit elements and thresholds. Section 145 of the Social Security Contributions and Benefits Act 1992 requires an annual review of Child Benefit rates. Section 150 of the Social Security Administration Act 1992 requires the weekly rate of Guardian's Allowance to be increased in line with prices.
Income tax allowances are uprated each year by indexation unless legislation is passed to override its effects. Statutory indexation for 2008-09 is based on changes to the Retail Prices Index in the year to September 2007. A statutory instrument – the Income Tax (Indexation) (No. 2) Order 2007 – will be laid shortly, confirming the effect of indexation on the personal allowances, blind person's allowance, the married couples' allowances and the income limit for age related allowances for 2008-09. The above-indexation increases to the allowances for people aged between 65 and 74 and those aged 75 and over will be introduced in the 2008 Finance Bill.
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