How will changes to the personal allowance affect my take-home pay?
The personal allowance – the amount of income on which you pay no tax – will increase from £6,035 to £6,475 in April 2009. But from April 2010, high earners will see this allowance gradually disappear. The allowance will be reduced by £1 for every £2 earned above £100,000. If your income is above a second limit of £140,000, you could lose your entire personal allowance. This new regime creates a range of arbitrary marginal tax rates, ranging from 40 per cent to 60 per cent, as you progress up the income scale.
