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Will you be better off? Mar 21

From the budget report, I’ve attempted to knock up a simple tax graph showing you who will be worse off and who better off under Gordon Brown’s new plans. He’s announced a cut of 2p in the basic rate of tax effective next April, but he’s also abolishing the starting 10% rate of tax, with no concomitant increase in personal thresholds announced. Here’s the basic effect – the blue line is the new tax regime as if applied today, the purple line is the current regime:
Tax rates

There are some caveats: Brown is making working tax credits more generous, so they will continue to a higher level, helping people on the lowest incomes (that’s my attempted interpretation anyway); and the top NI threshold will be raised, increasing slightly the NI paid by the richest.

The upshot, though, as far as I can see, is that if you earn in the £7k-£18k band, you’ll pay more tax despite this headline tax cut. The biggest beneficiaries appear, from the graph, to be those earning around £36k a year.

This is all rather back of the envelope so corrections welcome…

Update: Ryan’s worked out that £18,605 is the salary figure when you switch from loss to gain.

3 Responses

  1. 1

    Seems a bit unfair. I’ll be a few quid better off but someone earning half my salary will be worse off. I’d happily have it the other way round.

  2. 2

    It seems that 12 months down the line, Labour MPs are cottoning on to what you and I realised way back in march 2007.

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