The Budget 2016 - Personal Allowance
The Chancellor announced further good news regarding the Personal Allowance (the amount that can be earned without paying tax). The allowance has been increased considerably in recent years. It was £6,475 in 2010/2011, but has risen to £10,600 in the current tax year – an increase of over 63% in only five years!
Mr Osborne confirmed that the previously indicated increase for 2016/2017 of £11,000 would definitely be implemented and that it will increase again in 2017/2018 to £11,500.
Higher Rate Tax
The level at which 40% higher rate tax becomes payable has scarcely changed in recent years. This has had the effect of bringing several million workers into the higher rate tax bracket. Currently higher rate tax is payable on income above £42,385.
The announcement that higher rate tax will only become payable on income over £45,000 from 2017/2018 will therefore be welcomed by many.
In summary, for someone earning £45,000, a combination of the above increases will mean that total tax payable will reduce from £7,403 in the current tax year to £6,680 in 2017/2018 – an increase in take-home pay of £60.25 per month.
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