10p Tax?

[Sonak]

Can someone please explain to me what all this 10p Tax is all about? I'm having trouble understanding it all, is Gordon Brown's popularity gone down because of this?

Thanks all

[New Judge]

Up to the start of this financial year, people were allowed to earn �5,225 free of income tax and the next �2,230 was taxed at 10%. Income above �7,455 was taxed at 22%.

From April this year the 22% rate was reduced to 20%. Great news, thought everybody. BUT the 10% rate was abolished meaning that all taxable income (above �5,435 � the allowances are raised each year in line with inflation) was taxed at 20%.

This meant that people on low incomes (up to about �18,000) were actually worse off as a result of these changes. Some measures were included in the budget to ease the burden on pensioners and those receiving Tax Credits, but about 5m low paid workers remain hit.

Yes, this was a major contribution to the Prime Minister�s fall in popularity and to the Labour Party�s disastrous showing in last week�s local elections.

[Sonak]

Thanks New Judge - makes sense now but quite complicated and a unfair on the people on
low-income. So is this a final decision or an ongoing proposal?

[New Judge]

It began from the 6th April.

The government was threatened by some back benchers with an amendment to the Budget bill so they came up with a number of proposals (yet to be finalised) to compensate some (though by no means all) of those affected.