Reform of Income Tax and National Insurance - the "simplification" and alignment of Income Tax and National Insurance
From April 2008 the starting (10%) rate of Income Tax (IT) will be abolished (except for savings income) and the basic rate of tax will be reduced from 22% to 20%. This will leave 2 IT bands - a basic rate band at 20% and a higher rate tax band at 40%.
The basic rate limit, the point at which the 40% tax rate starts, will be increased by £800 per year above inflation in April 2009.
The upper earnings limit for National Insurance (NI), the rate at which the rate of NI reduces to 1%, will then be increased in stages in April 2008 and April 2009 so that by April 2009 it is equal to the higher rate income tax threshold.
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