The income tax mess

 

COMBINED INCOME TAX AND NATIONAL INSURANCE RATES 2008-12


2008/9

£ 0 – 4,525 0%
£ 4,525 – 6,035 11%
£ 6,035 – 40,040 31%
£ 40,040 – 40,835 21%
£ 40,835 + 41%

 

2009/10

£ 0 – 4,940 0%
£ 4,940 – 6,475 11%
£ 6,475 – 43,875 31 %
£ 43,875 + 41 %

 

2010/11

£ 0 – 4,940 0%
£ 4,940 – 6,475 11%
£ 6,475 – 43,875 31%
£ 43,875 – 100,000 41%
£ 100,000 – 106,475 61%
£ 106,475 – 140,000 41%
£ 140,000 – 146,475 61%
£ 146,475 + 41%

 

2011/12

£ 0 – 6,535 0%
£ 6,535 – 43,875 31.5%
£ 43,875 – 100,000 41.5%
£ 100,000 – 106,535 61.5%
£ 106,535 – 140,000 41.5%
£ 140,000 – 146,535 61.5%
£ 146,535 – 150,000 41.5%
£ 150,000 + 46.5%
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the-income-tax-mess

In the aftermath of last autumn's pre-budget report, most coverage focused on the temporary reduction in VAT from 17.5 percent to 15 percent and the alarming rate of growth in government borrowing, budget deficits, and national debt. More recently, there has been much talk about the proposed introduction of a new 45p tax rate on incomes over £150,000. It is due to be introduced in 2011, and the Tories say they won't stop it.

What people have generally missed, however, is the complete mess that Alistair Darling proposes to make of the income tax system from 2010 onwards, when people who earn over £100,000 will have their personal allowances phased out. The impact of this bizarrely complicated measure is to create two narrow income bands where the effective income tax rate is 60 percent. If you click 'read more' you will see a series of tables showing the combined income tax and national insurance (which is also set to rise in 2011) rates for the next four financial years – just see if they make any sense to you!

Even if an incoming Tory government did not prevent the introduction of a 45p income tax rate – and I think they should, given the stupidity of increasing the tax on wealth creators when we're trying to encourage economic recovery – I hope they would at least reconsider the government's complicated and irrational plans on the personal allowance. If taxes can't be cut, then they should at least be made simple and transparent. Honest, open government demands it.