Finance Bill 2011: Government increases personal allowance and reduces basic tax rate threshold

The government has confirmed it will increase the personal tax allowance for those aged under 65 to £7,475 and reduce the basic limit to £35,000 from 6 April 2011.

There will be no significant compliance costs for organisations from making this routine change to employees’ pay as you earn (PAYE) thresholds.

The national insurance (NI) contributions for upper earnings and upper profits limit will be reduced to the level of the higher rate threshold (the total of the personal allowance for those aged under 65 and the basic rate limit) by separate regulations.

Small firms, which are also employers, will make changes to their PAYE payrolls to reflect the new amounts of personal allowance and basic rate limit.

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