2008-09 Tax Year
The numbers revealed

This year's Pre-Budget Report was around six weeks earlier than usual. And because of this, the inflation figures for September, used to set allowances and pensions for the following tax year, had not yet been calculated. The Chancellor, Mr Darling did not reveal in his speech how much taxpayers could earn before falling into the tax and national insurance net, or next year's basic state pension. So how did the numbers work out for the new tax year?

Most people's personal tax allowances are estimated to increase by 4 per cent for the 2008-09 tax year, based on September's 3.9 per cent gain in the retail price index. Unusually, this is higher than the 3.7 per cent average increase in earnings over the past year.

What the numbers mean!

The personal allowance paid to everyone up to 65 rises by £210 from £5,225 to £5,435.

The allowance for people aged 65 to 74 rises by £1,480 from £7,550 to £9,030. This above inflation increase is compensation for the withdrawal of the 10 per cent starter tax rate from next April.

The allowance for those over 75 also increases by more than inflation for the same reason by £1,490 from £7,690 to £9,180.

The earnings level where the higher allowances paid to older people starts to be withdrawn rises by £900 from £20,900 to £21,800.

Married couples where at least one person was born before April 6, 1935 see their allowances rise by £250 from £6,285 to £6,535 with marginally more when one partner is at least 75. This is paid at 10 per cent, with better-off older couples receive a 10 per cent allowance on £2,540, £100 more, so they are £10 a year wealthier.

The very highly paid will be able to invest £235,000 in pension plans in 2008-09, a £10,000 increase.

National insurance starts next year at £105 a week (£5,460 a year), up £5 a week. Salary earners pay 11 per cent up to £770 a week (£40,040 a year), £100 a week more than this year. This reflects planned income tax changes and should leave, according to the Government, people no worse off. Beyond that, employed people pay 1 per cent.

The self-employed will pay national insurance at 8 per cent of profits between £5,435 and £40,040 in 2008-09, with the 1 per cent surcharge after that. They also have to pay a £2.30 a week "stamp," a 10p a week increase.

The basic state pension rises by £3.40 from £87.30 to £90.70 a week for a single person and increases by £5.45 from £139.60 to £145.05 for a couple.

The pension credit, the means-tested minimum income level for retired people on state benefits, rises by £5 from £119.05 to £124.05 for a single person and by £7.65 from £181.70 to £189.35 for a couple.

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