2009 personal tax allowance and new tax code 647L

[DIY Accounting]

The personal tax allowances are announced in the March budget, delayed this year until 22 April. The new tax code 647L for 2009 is already known.

The standard personal allowance effective from 7 September 2008 was 6,035 being the tax code 603L. From 6 April 2009 the new tax code will be 647L representing the new personal allowance of 6475.

The new 647L tax code can be applied by employers from 6 April 2009.

Current income tax rates and allowances are posted on the HMRC website at
http://www.hmrc.gov.uk/rates/it.htm

[DIY Accounting]

In the 2009 budget statement new income tax rules effecting the personal tax code and income tax rates were announced and will be effective from 6th April 2010.

Employees earning less than £100,000 per annum will not be affected.

The personal tax allowance for employees earning over £100,000 will be reduced by £1 for every £2 above £100,000 until the personal allowance is reduced to zero. Example; if the employee has a tax coding of 647L which is a personal tax allowance of 6475 and earnings are £110,000 the personal tax allowance will be reduced by 10,000/2= 5,000 leaving the actual tax code for that employee at 1475 (which is tax code allowance 6475-5000 reduction).

From the 2010-11 tax year in addition to the 20% basic tax rate and the 40% higher tax rate a new super tax rate of 50% will be introduced. The new 50% super tax rate will only apply to employees earnings over £150,000.