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2009 Budget - Income Tax changes
Our pre-budget report 2008 summary included the changes in income tax levels that were being proposed for those earning over £150,000 and the changes in personal allowances for those earning over £100,000.
The Budget statement 2009 increases the highest rate of income tax to 50% and brings forward its implementation date. The personal allowance changes are amended and also brought forward.
Our view
As it stood, these income tax increases would have resulted in tax relief on pension contributions being even more attractive to those affected.
Disappointingly, the restrictions announced on higher rate tax relief for pension contributions (see our budget update on Limiting Tax Relief For High Income Individuals) effectively reduce the tax advantages for pension savings for high earners.
What the Budget says
An additional rate of income tax of 50% will apply to income over £150,000. As well as replacing the level of 45% announced in the pre-budget report 2008, it also brings the implementation date forward from 6 April 2011 to 6 April 2010.
If income is above £150,000, dividends will be taxed at 42.5%.
Also from 6 April 2010, the income tax personal allowance will be reduced by £1 for every £2 of income above an income limit of £100,000, until it is nil.
Reference:
You can find further details in
The information provided is based on our current understanding of the Budget 2009 and associated documents and may be subject to alteration as a result of changes in legislation or practice.
