New personal allowances and NIC thresholds published

The indexed amounts of tax and NIC thresholds have been published this week. These would normally come as part of the Pre Budget Report, but the report was made early this year in preparation for a snap general election - which we now know never came!

So the tax and NIC limits for next year have been released to no advance publicity at all, and reveal the changes to NIC proposed by Mr Brown in his last Budget.

The personal allowance for income tax, which is also the point at which individuals start paying National Insurance Contributions has been set at £5,435 for the next tax year, which is £105 per week - an increase of around 5%. The Lower earnings limit, which is the point at which employees gain credit for state pensions rises from £87 per week to £90 per week.

However, it is at the upper end that we see the start of the changes proposed in March this year. The upper limit for Class 1 (employee) NIC at the full rate rises from £670 per week to £770 per week, which is £70 per week more than inflation. This means that employees earning in excess of this amount (annual equivalent £40,040) will pay an extra £9.50 per week in contributions next year. We shall see another rise in the following year, to bring the NIC top limit in line with the higher rate tax bracket.

Other changes announced include an inflation beating £1,480 increase in the personal allowance for the over 65's, and £1,490 for the over 75's, both of which are £1,180 in excess of inflation.