What are the Major Parties’ Policies on the Personal Allowance?

So with the general election coming up I thought it would be a good idea to try and find out what each party proposes to do with regard to the personal allowance. It has not been wholly easy to get this information but I have searched around and below is a summary of what I an find out:

Labour – I can’t actually find specific information on the personal allowance itself (that is not to say that there isn’t a specific policy on this but it is just difficult to find if there is) – however, they have pledged to reintroduce the 10% initial tax rate – one that was abolished by the previous labour government.

Both the Conservatives and the Liberal Democrats have pledged to increase the personal allowance to £12,500 – the Conservatives say this will be done by 2020 and the Lib Dems say they will do it within a year of coming to power.

UKIP have said in the past that they will increased the personal allowance to £13,500, the highest of all of the big players.

ISA Allowance 2015

So with the new tax year coming into play tomorrow (6th April 2015) there is an increase in the ISA allowance. The previous allowance was set at £15,000 for the tax year 2014/15 (although it was only increased to this level on 1st July 2014) and this is being increased to £15,240 for the tax year 2015/16.

The allowance is for all ISAs, whether they be for cash or for shares so make sure you are not over paying into separate ISA accounts.

Also don’t forget that you can’t carry over any of your unused ISA allowance so unless you can find someone who is open today (Easter Sunday) to take any extra payment for 2014/15 then you are probably too late.

There are also new rules being introduced in the autumn where savers will be able to replace money that is withdrawn from an ISA, as long as this happens in the same year – more to come on this when further details are available.

£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.

Can I Transfer My Personal Allowance?

The long question is: Can I transfer my personal allowance to my husband/wife/civil partner if I am not using it?

Well from April 2015 the answer is yes, you can transfer part of it. So, if you are earning less than the personal allowance in 2015/16 and your partner (i.e. wife/husband/civil partner) has earnings that are not taxed at any higher than the 20% rate, then you can transfer part of your personal allowance to them – currently the amount that you can transfer is £1,060.

This would mean that they would have a personal allowance of £11,660 instead of £10,600, reducing their tax bill by £212 for the year and your personal allowance would be £9,540. Therefore if you earn less than £9,540 a year then it is a no-brainer to transfer this allowance over to your partner.

However, your partner must not be in the higher rate tax bracket for the transfer to be allowed.

Also, HMRC have not yet declared how this transfer will take place although they have indicated that it will be via an online submission.

This may help families in particular where there is the traditional model of one parent staying at home to look after the children and the other working.

The standard level of income that you would need to earn to fall into the 40% tax bracket is £42,385. Of course this may be different in certain circumstances so you should take advice for your personal situation. So it is possible if you earn below this and your partner earns less than £9,540 then it is worthwhile for you to transfer over the portion of the personal allowance. OK so a gain of £212 a year is not massive but it’s certainly worth having.

Edited to add on 20 Feb 2015: you can register your interest in transferring part of your allowance here: https://www.gov.uk/marriage-allowance

 

Pensioners Could Earn £15,600 Tax Free

iStockbsheetFirstly I need to clarify the title of this article – this doesn’t only apply to pensioners but I wanted to highlight them as the most likely to benefit from this change in the tax rules that will start on 6 April 2015. Everyone can benefit, but it is more likely going to be pensioners that will have higher levels of savings income when compared to earned income (which includes pensions). Continue reading Pensioners Could Earn £15,600 Tax Free

Government Considering Restricting Personal Allowance to Residents

The Government is currently considering restricting the personal allowance only to residents of the UK. This means that anyone who is classed as a non-resident may not be entitled to the £10,000 per annum personal allowance that is given to any individual before they are required to pay tax (with the exception of high earners who may not get the personal allowance). Continue reading Government Considering Restricting Personal Allowance to Residents

What You Need To Know About UK Tax Allowances