UK New Tax Year 2009/2010 highlights.

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New tax year (09/10). The good and the bad

The 2009/10 tax year began on Monday, and it's all change. Bizarrely though, this year’s Budget is after the start of the tax year, so changes then may be backdated (last year's figures in brackets).

The boosts to income ...

1. • Personal allowance UP! Every man, woman and child can now earn £6,475 (£6,035) before paying income tax. For those aged 65-74, it’s £9,490 (£9,030), and for over-75s, £9,640 (£9,180).
2. • Basic rate tax threshold UP. You now pay 20% tax on the first £37,400 (£34,800) over the personal allowance, meaning under 65s hit the higher 40% rate at £43,875 (£40,835).
3. • National insurance start point UP. You now need to earn £110 per week (£105), before paying for NI, usually 11%.
4. • State pension UP. It's £95.25 (£90.70) a week for a single person.
5. • Pension credit UP. The minimum guaranteed income's now £130 for single pensioners (£124.05), and £198.45 for couples (£189.35). See the State Pension guide.
6. • New Health in Pregnancy Grant. All pregnant women will get a non-means-tested £190 in their 25th week. More in the Pregnancy Grant discussion.
7. • Inheritance tax threshold UP. You can leave £325,000 (£312,000) tax-free. See the Inheritance Tax guide.

And the hits ...

1. • Fiscal drag. This isn’t Alistair Darling in women’s clothes, it’s when increased allowances aren’t as generous as they seem. If wages and/or inflation increase by more than the allowances, effectively the government gets more tax revenue anyway, and the real value of the increase is less.
2. • National insurance upper earnings UP. You will pay 11% NI on earnings up to £43,888 a year (£40,040) and 1% above that.
3. • ISA limits. No change. Yet again, the amount savable tax-free hasn’t increased with inflation or earnings. See the Top Cash ISAs guide.
4. • Child Tax Credit family element. No change. Many families get this, and the freeze at £545 is an effective cut. Yet the means-tested element has increased to £2,235. See the Benefits Check-Up guide.

Discuss these changes with other MoneySavers in the Forum: New Tax Year 09/10.