Top Rate Tax Threshold from 2008/09?

Question

Can somebody confirm to me that the top rate tax threshold is increasing from something like 38K now to 43K in 2008/09? I'm beginning to think I imagined it, as I can't find any reference to it any where.

I'm kind of happy at the prospect, because I'm on the cusp of the 40% threshold, so now pay it, but I like it because it means I get 40% tax relief on my pension contributions. However, it is goes to 43K then I'm going to fall out of it (unless I get a 5K payrise - unlikely), so although paying less tax, I'll lose the 40% tax relief on my pension contributions.

Jonathan Bryce · Accepted Answer

It is, however the 11% NI threshold is increasing to the same level, so depending on how the sums work out, you might end up worse off.

Andy Pandy · Answer

No - in 2009/10.

The only announced increase is an increase of 800 above inflation in April 09.

The 43,000 figure comes from assumed inflation increases on top of this - in April

07 the HRT threshold is 39825, add in 2 years inflation at about 3% pa plus the 800 makes about 43,000 in April 2009.

It seems the figures have been worked out carefully to make high earners break even (in real terms)! What you gain in tax you lose in NI.

However if your pension contributions take you below the HRT threshold then you'll be worse off.

Matti Lamprhey · Answer

The rate of tax relief on pension contributions is immaterial. What's more important is the employee's NI contributions which you lose on the money and don't see again. The way round this is to persuade your employer to sacrifice some of your salary so that it can become an employer's pension contribution, hopefully augmented by some or all of the employer's NI contribution saved.

Matti

Top Rate Tax Threshold from 2008/09?

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