Further to my earlier article where I considered the combined percentage rate of income tax and national insurance contributions for the tax years 2008/09 and 2009/10, I now include the relevant percentage and income ranges for the tax years 2010/11 and 2011/12.

This is a basic illustration showing the position for those under 65 years old receiving income evenly throughout the year with a basic personal allowance, no employee benefits or pension contributions and no savings or investment income.

Income illustrations have been restricted to those with incomes of up to £50,000 as recently rules were introduced on personal allowance reductions for high earners.

The self employed in 2011/12

Earned income bracket Rate
From (£) To (£)
0 7,225 0%
7,226 7,475 9%
7,476 42,475 29%
42,476+   42%

In addition the annual Class 2 NIC liability will be £130 (i.e. 52 weeks at £2.50).

The earnings amount giving rise to payments on account for the future tax year (i.e. 2012/13) is £10,845 (up from £9,830 last year) for this level of income results in total annual income tax and Class 4 NIC liabilities over £1,000.

The self employed in 2010/11

Earned income bracket Rate
From (£) To (£)
0 5,715 0%
5,716 6,475 8%
6,476 43,875 28%
43,876+   41%

In addition the annual Class 2 NIC liability will be £125 (i.e. 52 weeks at £2.40).

The earnings amount giving rise to payments on account for the future tax year (i.e. 2011/12) is £9,830 for this level of income results in total annual income tax and Class 4 NIC liabilities over £1,000.

The employed in 2011/12

Earned income bracket Rate
From (£) To (£)
0 7,225 0%
7,226 7,475 12%
7,476 42,475 32%
42,476+   42%

The employed in 2010/11

Earned income bracket Rate
From (£) To (£)
0 5,715 0%
5,716 6,475 11%
6,476 43,875 31%
43,876+   41%

Conclusion

As one can see the across the board 1% increase in the national insurance rate started in April 2011 and the income level at which individuals start to pay 40% income tax has dropped.

copyright ©2011

This article is for discussion purposes only and does not represent advice on which you should act without consulting a professional as tax legislation is complex and changes frequently.

, ,
Trackback

no comment untill now

Add your comment now