Here is some information about new tax rules beginning 6 April 2008 (the beginning of the UK tax year):

Income Tax

  • The personal allowance (i.e earnings on which there is no income tax due) is increasing from £5,225 to £5,435 per annum
  • The current starting rate of tax of 10% for earnings up to £2,230 per annum is being abolished
  • The basic rate of income tax is reducing from 22% to 20% and will be levied on all earnings up to the higher tax (40%) limit
  • The higher tax (40%) limit is increasing from £ 34,600 to £ 36,000 per annum

So the first £5,435 will be tax free, the next £30,565 will be taxed at 20% and earnings thereafter will be taxed at 40%.  This amount excluded is similar to that of the US, but for ordinary income, the US has several more steps between its lowest (10%) and highest (36%?) rates.

National Insurance

  • The minimum earnings where NI is not deducted rises from £435 to £455 per month
  • NI is then payable at either 9.4% or 11% depending on your pension status.  NI is deducted at this rate on earnings and the earnings limit is increasing from £2,904 per month to £3,337 per month.
  • NI is then payable at 1%

So the first £5,460 will be NI free, the next £34,580 will suffer NI deductions at 9.4% or 11% and earnings thereafter will suffer NI deductions at 1%.  Again, the percentages are higher (7.6% US vs 11%) but not much different.

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