Personal allowances will be based upon a person’s date of birth rather than their age as of the 2013/14 tax year, with allowances for older people frozen at their 2012/13 levels.
People born between 6 April 1938 and 5 April 1948 will receive a higher allowance, with those born before 6 April 1938 receiving slightly more. So people reaching the age of 65 or 75 during 2013/14 will not see any increase to their personal allowance.
So who are the winners and losers? The clear winners are younger basic rate taxpayers who will see their personal allowance increase by £1,335 – a tax benefit of £267. But for higher rate taxpayers the benefit is just £62. People who qualify for the higher personal allowance will not see any difference because the allowance is frozen, although the income level at which the additional element is withdrawn has gone up by £700 to £26,100.
The most aggrieved will be those turning 65 during 2013/14. Instead of receiving the higher allowance of £10,500, they will continue to receive just the normal personal allowance of £9,440. The same is true for anyone reaching 75 next year but they will only lose the modest increase from £10,500 to £10,660.
1st March 2013