|How will the budget affect your tax rebate?|
The budget for 2007 was released on March 21st with a surprise reduction of 2 pence on income tax, at the end of what is likely to be Gordon Brown’s last budget. The initial sweet taste will soon disappear when we factor in the new amendments the chancellor has in store for us.
The government has decided to scrap the starting rate of tax, which currently stands at 10% of your income between £5,035 and £7,385. In Gordon Brown’s defense this is probably a positive change as it simplifies the tax structure and the starting rate seems to be almost a token offering.
The net effect of the changes in income tax will be a negative one for anyone earning below £17,000 but a positive one for anyone earning between £17,000 and £40,000. Those earning over £43,000 will pay £20 a year more in tax.
The most common reason for people being due a tax refund from HM Revenue & Customs is that they have only worked for part of a tax year, resulting in their tax allowance and starting tax rate being calculated incorrectly. As the new budget will abolish the starting rate of tax, it will reduce the number of people who are due a tax refund. We should see this as a positive sign as it means we are more likely to be paying the correct amount of tax and as a result are not due a tax refund.