Paul Lewis
That will mean less tax to pay for an estimated 23 million basic rate taxpayers and the Treasury estimates it will take 800,000 people out of paying tax altogether. Many of those who benefit will be women aged 60-64, who do not get the higher tax allowances for the over-65s.
The £200 saving will be taken back from anyone who pays tax at the higher rate of 40% by reducing the level at which that rate starts, currently on incomes over about £44,000. That will mean a lot more people pay 40% tax. The coalition Government has said it hopes eventually to increase the personal allowance for those under 65 to £10,000 and that will bring down the starting point for 40% tax still further.
No change was announced in the higher tax allowances for those over 65 and over 75. However, the Treasury told Saga it expects the over-65s allowance to rise with inflation to £9,900 in 2011/12.
The over-75s allowance will rise to £10,000 following a commitment given by Gordon Brown in March 2007. But if the over-75s allowance were raised from its current £9,640 by the 4.2% inflation expected in September, it would in fact be £10,050 in 2011/12.
The actual rates will be announced in the autumn pre-Budget or the spring Budget.
Written by Paul Lewis, this article was first published in the August 2010 issue of Saga Magazine. Paul's opinions are his own and for general information only. Always seek independent, professional, financial advice.