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.