The New Tax Year 2008-09 
 
 

What are changes to income tax? 
 

The Personal Allowances have increased as they do every year.  A Personal Allowance is the amount of income you can receive without having to pay tax on it.  From the 6 April 2008 this amount goes up from £5,225 to £5,435 a year for people aged under 65.  This works out at £104 a week. 
 

However, for people aged 65 or over, the amounts of Personal Allowances have risen way over the rate of inflation.  If you're 65 or over, your allowance has gone up from £7,550 to £9,030 a year or £173 a week.  If you're 75 or over the amount is £9,180 a year or ££176 a week. 
 

These allowances are given in full if you're on a modest income.  If your income is over £21,800 a year, these allowances will be reduced. 
 

Also the Married Couples Allowances which are given if you're married or in a Civil Partnership and were born before 6 April 1935, have gone up to £6,535 and to £6,625 if at least one of the couple is 75 or older. 
 

These allowances work differently from the Personal Allowances and reduce your tax bill by a set amount; either £653.50 or £662.50. 
 

What about the rate of tax? 
 

The basic rate of tax goes down from 22% to 20%.  You start to pay tax at 40% when your taxable income exceeds £36,000. 
 

What's happened to the 10% band? 
 

In earlier years you paid income tax at 10% on the first £2,230 of your taxable income.  This rate has now gone for earned income.  However, if your only taxable income is from investments (such as bank interest) you will still be taxable on this savings income at 10% until your income exceeds £2,320.  This means that if you used to get a repayment on your savings income, you will still be entitled to this.  
 

Now that the basic rate band has gone down, will it mean that gifts to charities under Gift Aid will not be worth as much to charities? 
 

Under the Gift Aid rules, charities could claim tax back at the basic rate on gifts made to them out of your taxed income.  For last year they could claim it back at 22% as this was the basic rate of tax.  Now that it has gone down to 20%, if nothing were done charities would only be able to claim back tax at 20% and so would be 2% worse off.  However, for the next 3 years charities will still be able to claim tax back at 22% and so won't lose out.  The government will pay this so it won't cost the donor any extra money. 
 

Are there any changes to Child Benefit? 
 

Yes, the rates have gone up so you will now get £18.55 a week for the eldest child and £12.55 for any other children.  The Guardian's Allowance has also gone up to £13.45 a wee. 
 

What about Tax Credits? 
 

The rates for the Child and the Working Tax credits have also gone up.  There are quite a few different rates and we will let you know what your new rate is. 
 
 
 
 

Has Inheritance Tax been affected? 
 

Yes.  When a person dies the amount he or she can leave without Inheritance Tax being charged is now £312,000 (previously £300,000)   
 

There was also a change which was introduced last October which affect married couples and civil partners.  These rules mean that any unused nil rate band that a partner has when he or she dies can be passed on to the surviving partner. 
 

For example, in 2007-08 the nil rate band was £300,000.   If someone dies and leaves £150,000 only half of this nil rate band has been used.  When the surviving partner eventually dies, he or she will have the nil rate band increased by 50%.  So, for example, if the nil rate band is £350,000 when the last partner dies, he or she will have the nil rate band increased by a further 50%, allowing them a nil rate band of £525,000 (£350,000 plus £350,000 x 50% = £175,000 = £525,000.)  
 

Are there any changes to Capital Gains Tax for individuals? 
 

This is a tax that's charged when you sell something and make a profit.  It is often used to charge tax on the gains people make when they sell shares at a profit. 
 

From April 2008, the first £9,600 of your gain will be exempt from Capital gains Tax.  Any tax due on larger gains will be charged at a flat rate of 18%. 
 

Some reliefs that applied before (such as Taper Relief and Indexation Allowance) are now abolished.