What the Budget means for your taxes
Most should find themselves with a little extra in their pockets with increases to the personal allowance and the basic rate band but no increases to income tax rates or National Insurance
Most taxpayers should find themselves with a little extra in their pockets, following a Budget that announced increases to the personal allowance and the basic rate band but no increases to income tax rates or National Insurance.
The personal allowance increase of £350 up to £11,850 from April 2018 is worth an extra £70 per tax year to basic rate taxpayers. Combined with the increase in National Insurance thresholds, many taxpayers earning up to £45,000 should take home an extra £8 per month. Taking into account the increase in the basic rate threshold (which is the amount at which individuals start to pay tax at 40 per cent) from £45,000 to £46,350, higher rate taxpayers (those earning up to £100,000) should find themselves £20 better off per month; an extra £240 over the course of 2018/19.
For pensioners who do not pay National Insurance the net increase will be slightly lower for basic rate tax payers, who will still be £8 per month better off. Pensioners who pay tax at higher rates will be £28 per month better off (£336 over the course of the tax year).
It also pays for basic rate taxpayers to be married as an married couple with one basic rate earner and one child will take home a whole £1 more each month than an unmarried couple in the same position. Married pensioners look to be the biggest winners, with those earning over £150,000 taking home an extra £57 per month – possibly not the intended effect of a Budget billed as being for the ‘next generation.’
So whilst everyone appears to be at least slightly better off, those taxpayers relying on investment income to fund their living costs may remember that the last Budget announced a reduction in the dividend allowance from £5,000 to £2,000, from April 2018.
(Article by Stefanie Tremain, Personal Tax Manager at Blick Rothenberg)