How much better or worse off will you be from April this and next year following the summer Budget announced yesterday?
The Chancellor George Osborne tinkered with the threshold at which workers start paying tax, as well as the level at which the higher rate kicks in, meaning that most of us will see a change in the amount of tax that disappears from earnings.
Deloitte has put together tables that show exactly how your tax bill will change according to your income, age, marital status and whether or not you have children.
Some households will gain as much as an extra £331 off their tax bill and others will lose out on £1,484. The tables also look at whether your National Insurance bill will go up or down.
The poorest tenth of society will lose around £800 a year as a result of tax and benefit changes in the years up to 2019 – equivalent to almost 7 per cent of their net income
THIS YEAR’S WINNERS AND LOSERS
Some 29million British workers will be in line for a pay rise next year when the tax threshold is raised from £10,600 to £11,000, George Osborne announced.
The Chancellor also pledged that the threshold – the amount any worker can earn before paying income tax – will rise to £12,500 before 2020 and will always rise in line with the national minimum wage.
And in a further boost for middle class workers the threshold for the top 40p tax rate will go up from £42,385 this year to £43,000 next year, rising to £50,000 by 2020.
However the tax breaks will come hand in hand with welfare reforms with the amount families can claim in benefits being cut from £26,000 to to £23,000 in London and the South East and £20,000 a year in the rest of the country.
Additional reforms will see support through tax credits and universal credits limited to two children.
The rate at which a household’s tax credit is reduced as it earns more is to be increased to 48 per cent, and the income rise disregard reduced from £5,000 to £2,500.
Income threshold for tax credits to be reduced from £6,420 to £3,850, with similar reductions for Universal Credit work allowances, which will no longer be awarded to non-disabled claimants without children.
Working age benefits will be frozen for four years, after years of handouts rising faster than wages for those in work. Tax credits will only be offered for the first two children in families.
| SCENARIO | ESTIMATED CHANGE IN NET INCOME 2015/16 – 2016/17 (£) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ANNUAL INCOME | £10,000 | £20,000 | £30,000 | £40,000 | £50,000 | £60,000 | £70,000 | £80,000 | £90,000 | £100,000 | £160,000 | £200,000 |
| 1. Couple, 1 working, 2 Children | -£1,474 | -£2,094 | -£1,127 | £90 | £151 | £151 | £151 | £151 | £151 | £151 | -£9 | -£9 |
| 2. Couple, 2 working, 2 Children | -£1,484 | -£2,094 | -£1,117 | £180 | £180 | £180 | £242 | £241 | £241 | £242 | £303 | £143 |
| 3. Single, 1 Child | -£1,474 | -£2,094 | £90 | £90 | £151 | £151 | £151 | £151 | £151 | £151 | -£9 | -£9 |
| 4. Husband & Wife Partnership, 2 Children | -£1,484 | -£2,171 | -£1,044 | £173 | £173 | £173 | £173 | £173 | £331 | £331 | £331 | £331 |
| 5. Single, No Children | -£1,292 | £90 | £90 | £90 | £151 | £151 | £151 | £151 | £151 | £151 | -£9 | -£9 |
| 6. Married Pensioner born pre 6/4/1938 | £0 | £76 | £96 | £83 | £206 | £206 | £206 | £206 | £206 | £206 | £46 | £46 |
| 7. Single Retired Pensioner born pre 6/4/1948 | £0 | £80 | £80 | £80 | £203 | £203 | £203 | £203 | £203 | £203 | £43 | £43 |
HOW THE FIGURES ARE CALCULATED
All income is assumed to be either employment, self-employment or pension income. No savings income has been included.
Calculations include child tax credits, working tax credit and child benefits where applicable. Universal credit has not been included.
Transferable personal allowances have not been claimed in the figures above.
Scenarios 6 and 7 assume all income is pension income so the extension of the savings rate band, or introduction of personal savings allowance in 2016/17, is not relevant.
EXPLANATION
Scenario 1:
Working partner works at least 30 hours per week and is aged above 25.
Children aged between 1 and 16, or under 19 and in full-time education.
No childcare costs.
Scenario 2:
Couple’s aggregate working hours are at least 30 hours per week with one member of the couple aged above 16 and working a minimum of 16 hours per week.
Couple’s income is split 2/3s, 1/3.
Children aged between 1 and 16, or under 19 and in full-time education.
No childcare costs.
Scenario 3:
Individual aged 25 or over and works at least 30 hours per week
Children aged between 1 and 16, or under 19 and in full-time education.
No childcare costs.
Scenario 4:
Couple’s aggregate working hours are at least 30 hours per week with one member of the couple aged above 16 and working a minimum of 16 hours per week.
Children aged between 1 and 16, or under 19 and in full-time education.
No childcare costs.
Income split 50:50.
Scenario 5:
Individual aged 25 or over and working at least 30 hours per week.
Scenario 6:
At least one member of the couple was born before 6 April 1935 in order to qualify for married couples allowance.
If born after 6 April 1938, no entitlement to 2nd age-related allowance. Pension credits excluded.
All income is earned by one person.
Scenario 7:
Pension credits excluded.
If born after 6 April 1948, no entitlement to age-related allowance.
| Tax allowances | 2015/16 | 2016/17 | |
| Personal allowance (born after 5 April 1948)1 | £10,600 | £11,000 | |
| Personal allowance (born before 6 April 1948)1,2,4 | £10,600 | £11,000 | |
| Personal allowance (born before 6 April 1938)1,2,4 | £10,660 | £11,000 | |
| Married couple’s allowance (spouse born before 6 April 1935)3 | £8,355 | £8,439 | |
| 20% basic rate band from | £10,600 | £11,000 | |
| 40% higher rate band from | £42,385 | £43,000 | |
| 45% additional rate band from | £150,000 | £150,000 | |
| Additional relief in respect of savings income for basic and higher rate taxpayers (proposed) | £0 | £200 | |
| Age related allowance restricted from | £27,700 | N/A | |
| Class 1 National Insurance lower rate | 12% | 12% | |
| On amounts (per week): | £155-£815 | £157-£827 | |
| Class 1 National Insurance higher rate | 2% | 2% | |
| On amounts (per week): | Over £815 | Over £827 | |
| Class 4 National Insurance lower rate | 9% | 9% | |
| On amounts from: | £8060 p.a. | £8141 p.a. | |
| Class 4 National Insurance higher rate | 2% | 2% | |
| On amounts over: | £42385 p.a. | £43000 p.a. |
Making changes: Chancellor George Osborne announced changes to income tax rates and national insurance
1. Reduced by £1 for each £2 of income (less deductions) in excess of £100,000.
2. Reduced by £1 for each £2 of income (less deductions) which exceeds £27,700 for 2015/16. However, this reduction cannot take the allowance below that for an individual born after 5th of April 1948 (subject to the reduction for income in excess of £100,000 above). The personal allowance is reduced first, then the married couple’s allowance.
3. Married couple’s allowance is restricted by £1 for every £2 of income in excess of the married couple’s allowance restriction threshold to a minimum of £3,220 in 2015/16 (estimated at £3,252 in 2016/17). Tax relief is given at 10 per cent.
4. Age related personal allowances are being phased out due to the increase in the general personal allowance. For 2015/16 a higher allowance applies for those born before 6 April 1938 only; from 2016/17 onwards there will be no Age related personal allowances.
5. These tables show the estimated change in net income from 2015/16 to 2016/17 as a result of changes announced on 8 July and earlier under the assumptions set out below. They are necessarily general in nature and do not cover all circumstances and situations or elections, reliefs or other actions that may affect an individual’s tax liabilities. They should not be used to calculate actual liabilities, determine any financial strategy or as a substitute for professional advice.
6. The personal allowance, higher rate threshold and national insurance upper earnings limit are all confirmed for 2016/17. All child tax credits, working tax credits and child benefits (where relevant) have been frozen as per 8 July announcement. All other variable figures used to calculate the result below have been inflated by 1 per cent.