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Income Tax personal allowances

All income tax allowances will increase in line with inflation. The personal allowance will increase to £5,435. The age-related personal allowances will rise to £9,030 for people aged between 65 and 74 and to £9,180 for those aged 75 and over.

£ per year (unless stated)	2007-08	Change	2008-09
Personal allowance (age under 65)	£5,225	+£210	£5,435
Personal allowance (age 65-74)	£7,550	+£1,480	£9,030
Personal allowance (age 75 and over)	£7,690	+£1,490	£9,180
Married couple's allowance (aged less than 75 and born before 6th April 1935)	£6,285	+£250	£6,535
Married couple's allowance (age 75 and over)	£6,365	+£260	£6,625
Married couple's allowance - minimum amount	£2,440	+£100	£2,540
Income limit for age-related allowances	£20,900	+£900	£21,800
Blind person’s allowance	£1,730	+£70	£1,800

• Personal and tax allowances

Income tax - taxable bands

The starting rate of Income Tax has been abolished and the basic rate has been cut from 22% to 20% creating a simpler structure of two rates .The tax bands have increased in line with indexation.

2007-08	£ per year	2008-09	£ per year
Starting rate: 10%	£0-£2,230	Abolished	-
Basic rate: 22%	£2,231-£34,600	Basic rate: 20%	£0-£36,000
Higher rate: 40%	Over £34,600	Higher rate: 40%	Over £36,000

When will the new tax rates take effect?

The new basic rate of income tax (20%) will take effect from 6 April 2008. In early May information will be sent to employers telling them how and when to action any changes resulting from the Budget. In particular the tax band width changes announced in this Budget will feature in the first pension or pay packet on or after 18 May 2008, backdated to the start of the tax year.

There will be a new 10% starting rate for savings income only, with a limit of £2,320. If your taxable non-savings income is above this limit then the 10% savings rate will not be applicable. There are no changes to the 10% dividend ordinary rate or the 32.5% dividend upper rate.

National Insurance contributions

National insurance contribution (NIC) rates and thresholds for 2008-09 were announced in the 2007 Pre-Budget Report. The starting point for employers’, employees’ and self-employed NICs in 2008-09 will increase in line with inflation to £105 per week. NICs are not paid on earnings or profits below this amount. The upper earnings and profits limits for NICs will increase from April 2008 in line with inflation from £670 to £770 per week.  For the self-employed, the rate of Class 2 contributions will increase to £2.30 per week.

£ per week (unless stated)	2007-08	Change	2008-09
Lower earnings limit, primary Class 1	£87	+£3	£90
Upper earnings limit, primary Class 1	£670	+£100	£770
Primary threshold	£100	+£5	£105
Secondary threshold	£100	+£5	£105
Class 2 rate (per week)	£2.20	+£0.10	£2.30
Class 2 small earnings exception	£4,635 per year	+£190	£4,825 per year
Special Class 2 rate for share fishermen (per week)	£2.85	+£0.10	£2.95
Special Class 2 rate for volunteer development workers	£4.35	+£0.15	£4.50
Class 3 rate (per week)	£7.80	+£0.30	£8.10
Class 4 lower profits limit	+£5,225 per year	+£210	£5,435
Class 4 upper profits limit	£34,840 per year	+£5,200	£40,040 per year

• National Insurance