2010 Budget: income tax & NI summary

A summary of the income tax and national insurance provisions in the 2010 UK Budget on 24 March is set out below.

Working Tax Credit for the over 60s

From 6 April 2011, people aged 60 and over will qualify for Working Tax Credits if they work at least 16 hours a week. Currently those aged 60 and over qualify for Working Tax Credits if:

they work 30 hours or more a week
they work 16 hours or more a week and they have dependent children, or qualify for the disability element
they work 16 hours or more and they are returning to work after being on certain benefits for six months or more (only available to the over 50s)

Working Tax Credits – Access to disability element

The Government will improve access to the Working Tax Credit disability element for those who have been claiming the Employment and Support Allowance (ESA). From 6 April 2011, ESA customers who have a limited capability for work and leave ESA to move into work for at least 16 hours a week with the help of Working Tax Credit, will automatically pass the disadvantage test and qualify for the disability element. HMRC will consult with customer representatives on the details.

The Government will also consider whether to review the criteria used in the disadvantage test of the Working Tax Credit in the longer term.

Tax credits, Child Benefit, Guardians Allowance rates and thresholds for 2010-11

As announced in the 2009 Pre-Budget Report (PBR) and confirmed in the Budget on 24 March 2010, from 6 April 2010:

the child element in Child Tax Credit will increase by £20 above earnings indexation to £2,300 per year. An increase of £65 per year overall
the disabled elements of Child Tax Credit will increase by 1.5 per cent
the elements of the Working Tax Credit (except the childcare element) will increase by 1.5 per cent
maximum amounts for childcare, family and baby element for Child Tax Credit, the income disregard, the first and second tax credit threshold and the withdrawal rates remain unchanged
the income threshold for those on Child Tax Credit only rises to £16,190

From 12 April 2010 Child Benefit rates and Guardians Allowance will increase by 1.5 per cent.

Tax rates and thresholds

Budget 2010 confirms the Pre-Budget Report 2009 announcement of the Income Tax rates and Personal Allowances for 2010-11:

the basic rate will remain at 20 per cent
and higher rate will remain at 40 per cent
the additional rate will be set at 50 per cent
the basic rate limit will remain at £37,400
the starting rate limit for savings will remain at £2,440
the personal allowances will remain at their 2009-10 amounts

From 2010-11 the additional rate will apply to taxable income above £150,000.

From 2010-11 the amount of the Personal Allowance will be gradually withdrawn for all individuals (regardless of age) with adjusted net incomes above £100,000. The rate of reduction is £1 for every £2 above the income limit.

National Insurance contributions rates and thresholds

The following amounts announced in the PBR 2009 have been confirmed in the Budget 2010. For 2010-11, with just two exceptions, all National Insurance contributions rates and thresholds are unchanged from the current year 2009-10. The two exceptions are:

the Lower Earnings Limit (LEL) which is linked to the basic State Pension will increase by £2 from £95 per week to £97 per week
the special Class 2 rate for Volunteer Development Workers which will increase by 10p from £4.75 per week to £4.85 per week, because this is linked to the LEL

For 2011-12, in addition to the 0.5 per cent increases already announced in PBR 2008:

the main rates of Class 1 and Class 4 National Insurance contributions will be increased by a further 0.5 per cent to 12 per cent and 9 per cent respectively
the employer rate for both Class 1A and 1B contributions will be increased by a further 0.5 per cent to 13.8 per cent
the additional rate of Class 1 and 4 National Insurance contributions
the primary threshold and lower profits limit will be increased by £570 to compensate the lowest earners