For those aged under 65 the personal allowance will be increased by £1,000, from £6,475 to £7,475 for 2011/12.
However a new concept of withdrawing the personal allowance for those with adjusted net income over £100,000 was introduced in 2010/11 and will continue for 2011/12. The reduction in the allowance is by £1 for every £2 of adjusted net income above the income limit. Adjusted net income for these purposes is broadly all income after adjustment for pension payments, charitable giving and relief for losses.
Tax bands and rates for 2011/12
The basic rate limit will be reduced from the current £37,400 to £35,000. Therefore an individual will pay 40% tax rather than the basic rate of 20% when their total income exceeds £42,475.
The new rate of income tax of 50% (the ‘additional rate’) will continue for 2011/12. This applies to taxable income above £150,000.
If dividend income is part of total income this is taxed at 10% where it falls within the basic rate band, 32.5% where liable at the higher rate of tax and 42.5% where liable to the additional rate of tax.
Internet link: Treasury website
Posted – 04/01/2011