Income Tax Changes

The income tax picture was improved slightly by the Budget.

It almost goes without saying now that any Budget or Autumn Statement will include an announcement about an increase in the personal allowance. The 2015 Budget was no exception: Mr Osborne announced (and the Finance Act 2015 legislates for) a £200 increase in the personal allowance in both 2016/17 and 2017/18. This will take the personal allowance up to £11,000. At the same time the basic rate band will increase by £115 in 2016/17 and £400 in 2017/18 to £32,000.

Add the new higher personal allowance to the improved basic rate band and in 2017/18 the starting point for higher rate tax will be £43,000. The Treasury noted that “this is the first above inflation increase in the higher rate threshold for seven years”, but omitted to add that the higher rate threshold was £575 higher in 2009/10.

The latest statistics from HMRC show that in 2014/15, almost one in six taxpayers paid 40% or 45% income tax. In 2009/10 the corresponding proportion of 40% taxpayers (there was no additional rate) was just over one in ten. If you needed a reminder of the importance of personal tax planning, rather than relying on manifesto promises and government largesse, look no further.

The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.
 

23rd April 2015

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