Buried in the budget - Divi tax up to 37.5%

[Manic]

In the Times today it staes that Darling has increased top rate of taxes on dividends to 37.5%.

In addition it also states that earnings over 100k will lose personal allowance entitlement at a rate of £1 for every £2 earnt.

I've not managed to find the detail yet, anyone know anything more?

[Purple Dalek]

Yes, tax is now really 61% and the marginal rate for lower earners can be 85%.

Enjoy.

[TheFaQQer]

A new top rate income tax band of 45% will apply to earned income over £150,000, and 37.5% to dividends (Source: PCG email this morning).

Personal allowances are undergoing reform. The £600 increase in the personal allowance announced in May as a temporary measure is to be made permanent, and increased by £130. However, from April 2010 the personal allowance of taxpayers earning over £100,000 will be reduced by up to half - effectively reducing it to the level of basic rate taxpayers. For taxpayers earning above £140,000 the allowance will be withdrawn completely. (Ibid.)

The relevant paragraph in the Report reads: "From that level of income, the personal allowance will be reduced at a rate of £1 of allowance lost for every £2 of income over that level until it is halved in value. At this value, the personal allowance will be worth the same as for a basic rate taxpayer. From £140,000 of income, the remaining allowance will be completely withdrawn at the same withdrawal rate, so that people with the very highest incomes do not benefit from the personal allowance[.]" (Ibid.)

[TheFaQQer]

Here's the text from HMRC website (hardly buried!):

Changes from April 2010

• The amount of basic personal allowance has not been set, but from 6 April 2010 the allowance will be subject to income limits of £100,000 and £140,000.
• This will mean that where an individual’s income is below the £100,000 income limit, they will continue to be entitled to the full allowance.
• Where an individual’s income is above the income limit of £100,000,the allowance will be reduced by £1 for every £2 above the income limit up to a maximum of one half of the basic personal allowance.
• Where an individual’s gross income is above a second income limit of £140,000, the amount of their allowance will be further reduced by £1 for every £2 above the income limit up to a maximum of the full amount of the basic personal allowance.

Changes from April 2011

• From 6 April 2011 taxable non-savings and savings income above £150,000 will be liable to income tax at a new rate 45 per cent.
• Dividends otherwise taxable at the new 45 per cent rate will be liable to income tax at a new rate of 37.5 per cent and the Trust rate will also increase to 45 per cent.
• The main rate of Class 1 and Class 4 NICs will be increased by 0.5 per cent to 11.5 per cent and 8.5 per cent respectively.
• The Class 1 employer rate of NICs will be increased by 0.5 per cent to 13.3 per cent. The increased rate will also apply to Class 1A and Class 1B contributions.
• The additional rate of Class 1 and 4 NICs will be increased by 0.5 per cent to 1.5 per cent.

Linky.

[Manic]

Thanks. It wasn't widely reported yesterday, and even in the Times it's a one liner in their recession special!

[Manic]

So looks like divi rate is applicable to>150k only?

[Badger]

Where an individual’s income is above the income limit of £100,000,the allowance will be reduced by £1 for every £2 above the income limit up to a maximum of one half of the basic personal allowance.

Where an individual’s gross income is above a second income limit of £140,000, the amount of their allowance will be further reduced by £1 for every £2 above the income limit up to a maximum of the full amount of the basic personal allowance

Glad to see they're taking the efficiency savings seriously and making it nice and easy to administer, ffs.

[Manic]

Move people off frontline IR35 investigation

[Doggy Styles]

So looks like divi rate is applicable to>150k only?

It looks like it:

Dividends otherwise taxable at the new 45 per cent rate will be liable to income tax at a new rate of 37.5 per cent and the Trust rate will also increase to 45 per cent.

[expat]

Move people off frontline IR35 investigation

What, with another 1% on NICs? The profits from IR35 are growing.