With the majority of local and international media covering the affects of the economic downturn on big business and banks, 1st Contact have decided to investigate how the current financial conditions will affect smaller, local businesses. We are also particularly interested in monitoring personal tax allowances, especially in light of come recent amendments to this system.
In May of 2008, it was reported that the government was under new pressure to provide compensation to the more than one million people who were worse off since the abolition of the 10p tax rate. Chancellor of the Exchequer, Alistair Darling, announced changes to what he had previously advised and stated that this will assist with the personal tax which affects over five million households. This will compensate many families but some one million will still be worse off.
This difficulty began when a series of tax changes started in April of 2008, as announced by Chancellor Darling in his budget update. First of all the changes began with the riddance of the 10% starter rate of income tax. Then, the basic tax rate dropped to 20% from 22%. Upon learning of less money in their household budget, over 5.3 million people spoke their mind and started leaning toward a rebellion led by Labour MPs.
Alistair Darling stated that he wished to compensate the households who had lost out with these tax dips. He was going to borrow £2.7 billion to raise the personal tax allowance by £600 to £6,035, which translates to an extra £120 extra for most this year. By doing so, most of the households will have received as much if not more than what they lost when the 10p tax was abolished and the other 1 million homes will see their losses halved at least.
However, of all the biggest losers will be the very lowest paid who have no families and who do not work enough hours to be able to claim tax credits. This group would include student workers, basic rate workers and part-time employees. 1st Contact will be able to discuss any tax related matters and they can provide assistance and support through these hard times.
What is the personal tax allowance?
The personal allowance is the very least you can make before you have to start paying taxes. The amount usually rises every year to take note of inflation, but if you are earning very low wages, under this stated amount, then you do not have to pay taxes. Students and part-time workers will be in this category. For this tax year, 2008-2009, it was £5,428 which was a slight rise since 2007-2008. With the increased personal tax allowance, if you now earn more than £6,035, which has gone up by £600, then you are expected to pay some form of personal income tax.
In your September 2008 pay packets you might have received a payment of £60 and 10% per month after that to make up the difference. You still had a chance before the end of 2008 to claim various expenses such as nursery care, medical expenses, education tuition and much more. With all of this in mind, it may be wise to have an accountant go over the changes in your personal tax allowance with you.
1st Contact believes that at the very least business owners will have a fighting chance of keeping their heads above water and coming out of the recession on top. We will provide regular news stories on this website to attempt to keep you abreast of any changes of this nature, as and when they transpire.
1st Contact Tax offers specialist tax services to contracting professionals these services include: Contractor Accounting, Contractor Umbrella payroll, Personal Tax for Contractors, Limited Companies for Contractors and Contractor Financial Advice.