Earlier this week the UK government announced plans to change the tax rate for both businesses and higher income earners in an attempt to help the ailing economy.

The main revelations form the pre-budget report include:

•  A New super income tax, of 45%, will be brought in for those earning £150,000 or more, starting from April 2011.
• National Insurance contributions will rise by 0.5%, for both employees and employers
• Value Added Tax will be reduced to 15% from 17.5%
• Basic rate tax payers will see an increase in their personal allowance of £120 a year being made permanent.

There are both winners and losers from the changes, however the biggest impact will be seen on the wealthy, who will not only face a higher tax rate but also a withdrawal of their personal allowance. Those earning between £100,000 /£106,500 and £140,000/£146,500 will be worst hit, experiencing a loophole whereby they will be paying an effective tax rate of 50%, more even than those on the 45% rate for those earning more than £150,000.
With the new changes to the tax rates and personal allowance make sure that the Inland Revenue have calculated your tax correctly by using an income tax calculator, and claiming tax that you might be rightfuly due.

How will the new tax rates affect you? Let us know your thoughts and comments.

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