The Office Concept
PAYE
-
The standard personal allowance (for people aged under 65) is to increase from £6475 to £7475.
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The Basic Rate Limit has been reduced from £37,400 to £35,000 so that higher rate payers don't benefit from the personal allowance increase.
| Bandwidth | From | To | Rate (%) | Basic Rate Band |
|---|---|---|---|---|
0 |
0.01 |
7475.00 |
00.00 |
No |
35,000 |
7475.01 |
42475.00 |
20.00 |
Yes |
150,000 |
42,475.01 |
150,000.00 |
40.00 |
No |
Excess |
150,000 |
Excess |
50.00 |
No |
The effect of the extra £1,000 added on to the personal allowance is a £200 saving per year (20% of £1,000).
National Insurance
National Insurance contributions - rates and allowances
| £ per week | 2010-11 | 2011-12 |
|---|---|---|
| Lower earnings limit, primary Class 1 | £97 |
£102 |
| Upper earnings limit, primary Class 1 | £844 |
£817 |
| Upper accrual point | £770 |
£770 |
| Primary Threshold | £110 |
£139 |
| Secondary Threshold | £110 |
£136 |
Employees' primary Class 1 rate between primary |
11% |
12% |
| Employees' primary Class 1 rate above upper earnings limit | 1% |
2% |
COMMENT
In summary, the lower paid will be better off and up to an income of £24,000 you'll pay less tax and less NIC. At that point the increase in NI rate will kick in and start to negate the PAYE saving. At £43,000 PA you will be getting less net pay. At £44,000 you'll be paying more PAYE than this year.
For employers, the cost of employing someone will increase when you pay them over £27,000 PA.
The Office Concept is a member of The Federation of Small Businesses..