Basic rate taxpayers to get 120....

Yes

Bitstring , from the wonderful person Section 31T said

Subject to the government having hidden snakes in the small print, then yes, the zero rate band is going up for everyone. The '60 pound lump sum' is just the result of applying a new, lower, tax code halfway through the tax year.

Higher tax code, of course.

Matti

"Matti Lamprhey" wrote

Yep - it's a ** higher "tax code" **, -or- a ** "lower tax" code ** !!

[Note the change in position of the quotes, makes them mean the same!]

When they realised what a c*ck-up they had made, why didn't they simply reinstate the 10% and 22% tax bands? It would saved them a lot of trouble, and the majority of 22% tax payers probably would not have objected too much.

I'm sure they said in one news bulletin that all standard rate taxpayers

*under_65* would get the 120 refund.

I assumed this to mean that, because the age allowance went up quite a lot in the last budget, over 65's are deemed already to have been compensated for the loss of the 10% - and won't get the extra 600 allowance. Is this correct?

If so, where does it leave those of us who have enough income to lose all the age allowance but not enough to have to pay the higher rate? Will we get the extra 600 allowance or not?

Incidentally, the Chancellor seemed to be claiming that higher rate taxpayers wouldn't benefit from his move because he was reducing the higher rate threshold by 600. But surely that still means that they'll pay 20% on

600 less - so they'll still get 120 even though they won't get 240.

In my view the whole thing is bonkers! Why didn't he just give everyone an additional allowance of 1000 and then progressively claw it back over an appropriate income range - in exactly the same way as age allowance is progressively removed? That way, the losers could be compensated more or less exactly without giving a handout to the rest of the population, and it would have cost him a hell of a lot less. By giving *everyone* the same regardless of whether they were a loser or not still leaves a basis inequity!

taxpayers

compensated

Yes. The increase in the age allowance already compensated over 65's.

Yes - your allowance can't fall below the standard personal allowance, which has increased by 600.

240.

This was crappily worded and confused the BBC amongst others.

The basic rate limit is being reduced by 1,200 - resulting in the "higher rate threshold", being defined as the sum of the allowance and the basic rate band, going down by 600.

everyone an

Because it's too hard. PAYE won't be able to handle it. And the way the age allowance works is bonkers anyway - why not be honest about it and say that pensioners get a higher allowance, but a 30% tax band between about 22,000 and 28,000? The effect is identical.

People on about 35,000 are the big winners in all this - the reduction in the basic rate gained them much more than the loss of the

10p tax band cost them, they aren't affected by the NI UEL increase, and now they're getting this extra 120 as well!!

People on about 7,750 are the worst off, they are 232 down due to the loss of the 10p band but they only get 120 to compensate, meaning they're still down 112.

Well, I suppose it wouldn't be automatic - in that everyone would have to be given an individual code depending on their total income. It seems to work for age allowance - but I suppose it does mean that the taxman needs to know your total income, which he might not if you haven't needed to fill in a tax return.

Probably not *quite* identical. The thing about age allowance is that it depends on your *total* [1] income rather than your *taxable* income [2] - whereas thresholds between rates are based on taxable income.

[1] total in the sense of being income before the deduction of allowances - but excluding non-taxable income such as ISA, Savings certificates, certain non-means-tested benefits, etc. [2] clawing back by varying the allowance clearly *can't* depend on taxable income because that itself depends on the allowance - and you end up with a recursive calculation.

The whole point of PAYE is that it *doesn't* need to know what your income is going to be to be, it'll get your tax correct regardless if the income on which it is paid is your only income (or even if it isn't - in a lot of cases).

Yes - identical. See below.

allowances -

You just take off the age allowance off the income limit and use that!

Let I be the income limit.

Let A be the age allowance (this will be different for over and under

75's).

Let S be the standard allowance.

You simply:

1) Give all pensioners their age allowance A in their tax code.

2) Set a 30% tax band starting at (I-A) up to (I-A) + (A-S)*2

A fiddle will be needed if someone is in the 30% tax band and they have savings income - or if they are just below the band and savings income pushes them over - but these are no different to what happens with a real band - eg the 40% band.

Precisely! And that's the very reason why your method won't work in the universal way you suggest. In my experience, pensioners who have sufficient income to affect the age allowance are likely to have a substantial proportion of that in the form of savings income.

However, something similar to your proposed method *would* have worked for clawing back the excess allowance used to compensate for the loss of the 10% rate, since most people affected are far less likely to have savings income - and if they do, will will just get over-compensated a bit which doesn't really matter on a one-off basis.

That's why I said it would work in *exactly* the same way as it does if they're in the 40% band!!

It's not a problem with PAYE - the correct tax will always be paid on the PAYE income. It's just that there will be extra tax to pay on savings income, if they're in the 30% or 40% band. Which is usually accounted for by a tax code fiddle.

They pay more 40% tax to make up for it.

That would have required admitting to a cockup.

Pete