The 10k tax threshold.. can you explain?

[mrsbean78]

I am absolutely, utterly useless with figures. I think that part of my brain has withered and died since I was at school. Can someone explain what difference this Lib dem policy makes to a household like ours, combined income of about 55K (35,20), in practical terms?

Right now you don't pay any tax on the first, erm, 6ish thousand pounds you earn in a yr.
If the new threshold comes in you won't pay any tax on the first 10k you earn (each).
So that's 4k each where you won't be paying 20% tax, approx £1,600 a year?

Of course there will probably be other changes too, which may make you better or worse off. Are you married? I hear the Tories want to give people extra money for being married.

That was all estimates, if someone has the actual numbers that'd be great.

Sadly some of this saving will go on the increased NIC earnings.

I voted lib dem and I think raising the £10,000 threshold was their best policy.

However my concern is that the tories/libs are compromising on policy in such away that the middle to higher earners are worse off than they would have been if either lib dem or tories had been elected on their own.

The tories are saying they will phase in the £10,000 threshold- does this mean that only those on lowest incomes say under £20,000 will benefit? Under the original lib dem proposal people were supposed to benefit up to £112,000. what do they mean by this phasing in?

The lib dems said they would cut tax credits over 31k and the tories over 50k - what will the figure be now?

child benefit - there are rumours this will be cut for higher earners - is this over 30k too?

I have a feeling people earning over 30k will be much worse off than the manifestos suggested. This is only a hunch and not yet based on fact.

What do others think?

The pledge was to simplify the tax system. So you wouldn't put caveats on who benefits from the 10k personal allowance if your aim was to simplify... it would become universal.

However, to keep things in balance it's likely that the thresholds for 40% & 50% tax would not go up much, or they might play around with National Insurance contributions

Child Tax credits are not meaningful unless your net income (after deducting what you pay for child care) is below about £22k. Child benefit is universal at the moment and my guess is that, rather than means-test it, they would simply freeze it at its current level, allow it to become worth next to nothing over time, and use means-tested CTC instead.

Chil1234, is that below about £22K based on the couple's income or woman's own? Thanks

Family income if you're a couple, sole income if you're a singleton. If you run a few 'what if' numbers through a very good website called www.entitledto.com you can see the differences as currently applied. If your family income is £50k and you pay £12k in chidcare then you get a very different result (i.e. no change in your entitlement)than if your family income is £30k and you pay £12k in child care.

The £22k is what I remember from last time I did the exercise.. it could be a little or lower today.

Actually... just did the experiment again. Net income below £30k seems to trigger CTC. Net income between £30k and the top end and the CTC stays the same. WFTC kicks in when your household income gets to £28k

abr1 are NIC still being increased. I thought the Tories were against that move.

I have heard a few economists talking about the 10K tax threshold and they seem to think it is one of the most expensive policies resulting from the pact.
I hear it is going to be phased in over the next five years or something.
I wonder where the money will be found to pay for this - not that I'm complaining.
VAT, Fuel, Cigs, Alchol?

While the pledge was to simplify the tax system, the last administration has just finished pushing through a change that means people earning more than 100 get no personal allowance (technically, it's a sharp taper rather than immediate removal). That could bring in a reasonable amount of extra cash for the government's coffers, so it will be interesting to see if it's removed by the new administration.

Anyone earning over 35k I believe won't get anything from the 10k personal allowance - I presume their's will stay the same. NIC are going up for employees, but not for employers.

Do you think I will be effected because I would risk losing my mortgage if my ctc or cb was lost. dp's income is a graduate training post and is on 15,000. The only reason I got a house is because I have worked since 13 and always put half my wages away So had a very large deposit.

If your joint household income, net of childcare costs, is less than £30k then you'll probably carry on getting CTC. Any changes will be flagged up well in advance and not sprung on people at the drop of a hat. So in 50 days' time when they announce the emergency budget, take a special note of any new rules surrounding CTC and work out exactly what it will mean for you.

In general, it's always a good idea to not spend right up to the wire but always put something aside for a rainy day... so your saving habit will serve you well. And, if you have a mortgage, see if you can borrow the same money cheaper and understand what your lender's policies are if people get into difficulties through unemployment etc.

OK thanks.

anyone earning under 10k per year will be paying far more NI that income tax, so although the income tax releif will raise the NI will not and possibly go up and so we will gain on one and loss on the other

'abr1 are NIC still being increased. I thought the Tories were against that move.'

They are.
They were.
Bit of a worry, tbh.

NI will not be increased for employers, but it will for employees.

Ivykaty, it's only if you earn more than 34,500 that the NI contribution increase negates the increase from the lifting of the tax threshold.

The reason it's going ahead in the agreement (albeit in stages) is to try and cushion the effect of the coming cuts on the people with the lowest incomes in a way that will stimulate the economy at the same time. It's a pity it's not happening faster, but it's all a balancing act.