Category Archives: UK Budget

Personal Allowance 2018/19

budget 2017 uk tax allowances
Philip Hammond delivered his 2017 Budget today.

Budget 2017

The Chancellor Philip Hammond has announced in his 2017 Budget today that the personal allowance will increase with effect from April 2018 to £11,850.

This is the amount that people can earn before having to pay any tax on earnings above that level.

An increase of £350 in the personal allowance means an extra £70 a year (or £5.83 a month) in the pocket of a basic rate tax payer.

Currently the personal allowance sits at £11,500 for the year 2017/18 and so this is an increase of 3.04%.

The eventual aim that has been proposed by the government is to get the personal allowance to £12,500 a year.

The higher rate tax bracket will also be increase from £45,000 to £46,350. The aim is for this to be increased eventually to £50,000.

You can find all of the current personal allowance rates in the tables on this page (these will be updated as they are announced).

Also announced in the Budget today was the increase in the National Minimum Wage of 4.4%, rising from £7.50 an hour to £7.83 an hour with effect from April 2018.

Personal Allowance Increased for 2017/18

The Chancellor of the Exchequer, George Osborne,  today announced in his March 2016 Budget an increase in the personal allowance for 2017/18 which for 2016/17 stands at £11,000.

The personal allowance for 2017/18 has been set at £11,500 which is an increase of 4.5% over the previous year. This increase is to keep in line with the plan that the Conservative Party announced in the election manifesto to increase the personal allowance by the end of their term to £12,500.

This single level personal allowance now applies to people of all ages, including those over 75, as the age allowance for pensioners has been removed so that everyone is entitled to the same personal allowance.

 

New Dividend Tax Introduced in 2015 Budget

In recent years there have been a lot of changes to personal allowances and indeed other allowances that affect personal income.  Not only has the personal allowance increased significantly and more recently a tax free savings allowance was introduced, now there is another change to the tax charged on dividend payments to individuals.

The changes are a little bit complex and will affect quite a lot of people receiving dividend income, and not always for the better.

There is a new allowance of £5,000 per person per year on dividends which is tax free, but any dividend income over this amount will be taxed at a higher rate than previously, depending on the tax bracket of the individual.

A basic rate tax payer will need to pay 7.5% tax on amounts over £5,000, a higher rate tax payer will need to pay 32.5% and an additional rate tax payer will need to pay 38.1%.

These rates are effective from April 1016.

It may be useful to note that the new £5,000 savings tax free rate is in addition to this (for those who have low enough incomes) and so it may be worth getting some advice as to whether some shares should be switched to a different investment vehicle to minimise tax.

Full Details of Summer 2015 Budget Inheritance Tax Changes

In the summer 2015 budget this week, George Osborne introduced some major changes to the rules on inheritance tax, so that properties were given an additional allowance that would take a lot of them out of the inheritance tax limits.

The current Inheritance Tax threshold is £325,000. This will remain but in addition there will be an allowance for family homes that are passed on to direct descendants (children and grandchildren). This new allowance will reach it’s maximum level of £175,000 in 2020/21 but will be tapered from 2017 onwards until it reaches that rate.

So a summary of the new allowance in tax years is as follows:

2017/18 – £100,000

2018/19 – £125,000

2019/20 – £150,000

2020/21 – £175,000

The nil rate band will then increase in line with the Consumer Price Index from 2021 onwards.

The allowance can be passed between couples so that when the first partner dies that allowance is passed on to the surviving spouse so that when they die the allowance is effectively doubled. Thus when the second partner dies the allowance could be worth up to £350,000. Add this to the standard Inheritance tax allowance (that can also be passed between spouses) and this would give a total value of £1m (remembering that £350,000 of this amount can only be held against property).

The existing £325,000 allowance can be used against any assets that the deceased holds, including property.

There has also been a clause introduced that means that if someone downsizes from their main residence, the value of their previous home can be taken into account. For example, an individual might choose to downsize from a home worth £250,000 to a home worth £150,000. They could still benefit from the maximum allowance of £175,000 in 2020-21 if they leave the home and £25,000 of other assets to direct descendants.

There will also be a tapered withdrawal of this new Inheritance Property Allowance for properties worth over £2m. The tapering will be at the rate of £1 for every £2 in value over £2m, for example:

Property worth £2,100,000 – IHT Property allowance is reduced by £50,000.

Therefore, property worth £2,350,000 (after 2020/21) will not have any property allowance attached to it.

E&OE

40% Tax Band Increased for 2016/17

The chancellor George Osborne this week announced in his extra budget that the figure at which the 40% tax band kicks in will be increased from 2016 to £43,000 from the current level for 2015/16 of £42,385.

The 2015/16 figure of £42,385 is made up of the £10,600 personal allowance and the 20% tax band amount of £31,785.

Next year’s figure is made up of the new £11,000 personal allowance and a 20% tax band amount of £32,000.

Whilst the personal allowance had been increasing, the 20% tax band allowance had been decreasing in recent years so this is the first increase for a while which brings it back up to the level it was in 2013/14.

£11,000 Personal Allowance Announced

In the Budget today George Osborne announced that the personal allowance would be increased to £11,000 a year with effect from the 2017/18 tax year. This will be preceded by another increase in the personal allowance to £10,800 for the tax year 2016/17.

There have been a number of increases in the personal allowance over the last few years and these increases come after the recent increase in the personal allowance for the year 2015/16 to £10,600.

Tax Changes in the 2013 Budget

A number of changes were announced by the Chancellor George Osborn yesterday, but there were only a couple of changes that affected UK tax allowances.

Key Points from the UK Budget 2013 with regard to UK Tax Allowances:

The plan was always to increase the personal allowance to £10,000 by 2015 but this has now been brought forward by a year and the £10,000 UK tax allowance will now be effective from 6 April 2014. This is the amount that people can earn before being charged any income tax. However, National Insurance contributions are still payable on earnings over £7,606 at the rate of 12%.

Corporation tax will decrease from April 2015 to 20% from the previous rate of 21%, which in itself is payable from April 2014. In fact the rate has been reduced significantly from the 28% it is in 2012/13 to 24% in 2013/14, giving the UK one of the lowest rates of corporation tax.

 

 

 

2012 Budget Summary

UK Budget 2012

Today was the annual budget announcement by the Chancellor of the Exchequer, George Osborne. Many changes were anticipated in this budget with possibly the most reported being changes to the UK personal allowances which the Liberal Democrats have agreed with the coalition government should be increased eventually to £10,000 per annum by 2015. Whether the increase of the allowance to this level will be accelerated was a topic of much discussion.

Added to that were questions about fuel duty which is a bugbear of the UK, as they have such a high rate of tax making it one of the most expensive countries in the world for fuel.

So, after all the hype the most pertinent points in the UK budget for the ‘common man’ (and woman!) are listed below. Obviously there are many more points to report but this article is just to give the overview on the things in the UK Budget 2012 that affect us most in our everyday lives.

UK Tax Allowances: In line with the plan to increase the UK Personal allowance to £10,000, the Chancellor has announced the largest increase ever in the personal allowance of £1,100 to make the allowance £9,205 from the tax year 2013/14. This will mean that most people who earn above this amount will save £220 a year in tax.

However, age related allowances will eventually be scrapped as they are considered confusing and cause extra administration. Pensioners will not in effect suffer any financial loss because of the increase in the general personal allowance, but they will not be given any extra allowance on top of this.

Tax Rates: The only change is in the higher rate tax band which will be reduced from 50p to 45p as the band has been shown not to be fiscally viable.

Child Benefit: It was previously announced that anyone paying higher rate tax would not be entitled to child benefit but this has been clarified and slightly revised so that there is a tapered system and not just a cut off. The amount of child benefit will be reduced by 1% for every £100 earned over £50,000.

Fuel: Fuel duty will not rise and this will remain the case unless the price of oil drops below £40 a barrel in which case this can be reviewed. So no change at the pumps for the present time.

Alcohol: the chancellor said that he was not making any further changes to the alcohol duty increases that were set out by his predecessor.

Smoking: There will be an increase in the duty on cigarettes and tobacco of 5% and this will be effective from midnight tonight (21st March 2012). This will put an average of 37p on a packet of cigarettes. The reason that the Chancellor introduced this is that smoking is the biggest cause of preventable illness and death in the UK and there is evidence that increasing the rate of duty on smoking encourages more people to give up or reduce their intake.

Stamp Duty: The only change to stamp duty land tax does not effect the everyday housebuyer. In order to stop avoidance of stamp duty, a tax rate of 15% was introduced for residential property being bought under the umbrella of a company and a rate of 7% introduced for properties over the value of £2m. Effective Midnight tonight.

Corporation Tax: Corporation tax has been cut and will be cut further to 24% from next month. It will also be reduced so that over the next 2 years it will decline to 22% – one of the lowest rates in the world, to encourage investment in Britain.

Armed Forces’ Families: Extra relief will be given to families of those deployed with a 100% relief on council tax and the operations allowance and welfare grant doubled.

Further Budget Issues

Gambling duties for online sites will be based on the location of the consumer and not the company providing the service. This is because companies have been forced to set up overseas so that they don’t have to pay the higher tax rates that apply in Britain. 90% of online gambling sites are offshore.

Each individual will be sent a statement detailing how much tax they are paying and what services that money is going towards, including how much of that tax is funding the deficit and how much is contributing to public spending.

There will be a restriction as to how much higher earning individuals can use tax relief schemes to offset the amount of tax that they pay. At the moment the reliefs are unlimited but for anyone claiming more than £50,000 in relief this will be restricted to 25% of their earnings.

Vehicle duty will be increased but will be frozen for haulage contractors.

There will be a continuous review of the State Pension Age to keep it in line with longevity factors.

Network rail will be expanding some of the rail networks in the North including rail lines in the Manchester to Sheffield area.

The government will be backing the Life Sciences sector. At present 1/5 of new medicines are developed in the UK and there will be reductions in the taxes on patents. There will also be an centre for excellence in the field of aerodynamics set up where Britain already leads the way. Added to this there will be schemes to encourage investment in development of video games, animation etc. As George osborne said “Keep Wallace and Grommet where they are!”.

The government will be funding ultrafast broadband in 10 cities: Belfast, Birmingham, Bradford, Bristol, Cardiff, Edinburgh, Leeds, Manchester, Newcastle and London.

There will be an overhaul of planning regulation particularly so that we can get investment from abroad that is currently going elsewhere because they can’t get planning consent.

Legislation will be introduced to relax Sunday trading laws for 8 Sundays starting 22 July in line with the Olympics being held in London.

They will be exploring the idea of enterprise loans for young people to start their own businesses.

Tax on small firms will be on the basis of cash that passes through – those with a turnover up to £77k – this will make tax simpler for 3m firms.

They will be moving forward with integration of NI and tax. They will address loopholes in the current VAT regulations e.g. where VAT is different when paid on takeaways from the high street and those from a supermarket.