Pre Budget Report

14 December 2009

The Pre-Budget Report (PBR) has taken precedence on all the news pages over the last few days. If you would like further information regarding the potential implications of the PBR then visit HM Treasury’s website

Announced tax rates and allowances

Higher rate tax

The Chancellor announced a freeze on income tax for those that pay 40% tax, meaning a freeze on higher rate threshold from April 2012.

For the tax year 2010 / 11 all tax allowances and thresholds will be the same as for the current year.

Income Tax Allowances:

Income tax allowances £ per year (unless stated)	2009 / 10	Change	2010 / 11
Income tax personal and age-related allowances
Personal allowance (age under 65)	£6,475	-	£6,475
Personal allowance (age 65-74)	£9,490	-	£9,490
Personal allowance (age 75 and over)	£9,640	-	£9,640
Married couple's allowance* (age 75 and over)	£6,965	-	£6,965
Married couple's allowance* - minimum amount	£2,670	-	£2,670
Income limit for age-related allowances	£22,900	-	£22,900
Blind person’s allowance	£1,890	-	£1,890

*Married couple’s allowance is given at the rate of 10%.

Income tax Bands:

2009 / 10	£ per year	2010 / 11	£ per year
Starting savings rate: 10%*	£0-£2,440	Starting savings rate: 10%*	£0-£2,440
Basic rate: 20%	£0-£37,400	Basic rate: 20%	£0-£37,400
Higher rate: 40%	Over £37,400	Higher rate: 40%	£37,401-£150,000
Additional rate: 50% N/A		Additional rate: 50% Over £150,000

*There is a 10p starting rate for savings only. If an individual’s non-savings taxable income exceeds the starting rate limit, the 10p starting rate for savings will not be available for savings income.

National Insurance contributions rates and thresholds

If you are an employer, employee or self-employed you need to read this information.

National Insurance rates that will apply from April 2010:

Increase by April 2010 rate

per week

LEL (Linked to state pension) £2 £97

Class 2 rate for Volunteer

Development Workers 10p £4.85

All other NICs rates and thresholds are unchanged for 2010 / 11.

The 2008 Pre-Budget Report announced that from 2011 / 12 the main rate of Class 1 and Class 4 NICs will be increased by 0.5% to 11.5% and 8.5% respectively. And the Class 1 employer rate will be increased by 0.5% to 13.3%. The increased rate will apply to Class 1A and 1B contributions. The additional rate of Class 1 and 4 NICs will also be increased by 0.5% to 1.5%

However in the December PBR further increases from 2011 / 12 were also:

The main rate of Class 1 and 4 NICs by a further 0.5% to 12% and 9% respectively

The Class 1 employer rate will be increased by a further 0.5% to 13.8% from 2011 / 12. The increased rate will also apply to Class 1A and 1B contributions

The additional rate of Class 1 and 4 NICs will be increased by a further 0.5% to 2% from 2011 / 12

National Insurance Contributions:

£ per week (unless stated)	2009-10	Change	2010-11
Lower earnings limit, primary Class 1	£95	£2	£97
Upper earnings limit, primary Class 1	£844	-	£844
Upper Accruals Point	£770	-	£770
Primary threshold	£110	-	£110
Secondary threshold	£110	-	£110
Employees’ primary Class 1 rate between primary threshold and upper earnings limit	11%	-	11%
Employees’ primary Class 1 rate above upper earnings limit	1%	-	1%
Employees’ contracted-out rebate - salary-related schemes	1.6%	-	1.6%
Employees’ contracted-out rebate - money-purchase schemes	1.6%	-	1.6%
Married women’s reduced rate between primary threshold and upper earnings limit	4.85%	-	4.85%
Married women’s rate above upper earnings limit	1%	-	1%
Employers’ secondary Class 1 rate above secondary threshold	12.8%	-	12.8%
Employers’ contracted-out rebate, salary-related schemes	3.7%	-	3.7%
Employers’ contracted-out rebate, money-purchase schemes	1.4%	-	1.4%
Class 2 rate	£2.40	-	£2.40
Class 2 small earnings exception (per year)	£5,075	-	£5,075
Special Class 2 rate for share fishermen	£3.05	-	£3.05
Special Class 2 rate for volunteer development workers	£4.75	£0.10	£4.85
Class 3 rate (per week)	£12.05	-	£12.05

Pre Budget Report

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