How much better off will you be from April this and next year following the Budget announced today?
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 from April 2015 and 2016.
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 £472 off their tax bill and others having to fork out another £55 from April. The tables also look at whether your National Insurance bill will go up or down.
Winners and losers: The rate at which workers start paying 40 per cent tax will rise this year and the next
THIS YEAR’S WINNERS
George Osborne tilted his Budget at the ‘squeezed middle’ today with above-inflation hikes for the threshold at which workers start paying the 40p higher income tax rate.
The Chancellor said that workers will start paying 40 per cent tax at £42,385 from April this year – a £520 increase from the current £41,865 threshold. This will then increase by £915 to £43,300 by 2017/18.
The single person’s tax-free allowance – the amount of income that one can earn before paying any tax at all – will rise to £10,800 from April 2016, more than the £10,600 previously announced. It will then rise to £11,000 the year after, Mr Osborne said.
Currently the personal allowance stands at £10,000 and it will rise to £10,600 from next month. The government has raised the allowance steadily since it came to power in 2010.
The rise in personal allowance will mean tax cuts for 27million people, making the basic-rate taxpayer £80 a year better off and saving £172 a year to those paying the higher tax rate, according to Treasury calculations.
Because the increase in the personal allowance is not offset by a reduction in the 40p threshold, higher-rate taxpayers benefit in full from today’s announcements.
The rise in personal allowance also means that in two years time 3.7million people are expected to be taken out of income tax altogether.
Meanwhile, the Treasury said 100,000 fewer taxpayers will end up in the higher rate tax band as a result of the above-inflation increase in the 40p income tax threshold. The 1.4 per cent hike in the higher-rate threshold was the first above-inflation rise for seven years.
The Chancellor also announced that the transferable tax allowance for married couples is to rise by £50 to £1,100 from the current £1,050.
| Scenario | Change in net income 2014/15 – 2015/16 (£) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 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 | 140 | 472 | 472 | 362 | 203 | 185 | 185 | 185 | 185 | 185 | (55) | (55) |
| 2. Couple, 2 working, 2 Children | 128 | 472 | 392 | 282 | 282 | 282 | 334 | 328 | 317 | 316 | 368 | 128 |
| 3. Single, 1 Child | 102 | 222 | 142 | 142 | 195 | 185 | 185 | 185 | 185 | 185 | (55) | (55) |
| 4. Husband & Wife Partnership, 2 Children | 128 | 141 | 381 | 271 | 271 | 271 | 271 | 271 | 409 | 409 | 391 | 391 |
| 5. Single, No Children | 42 | 132 | 132 | 132 | 185 | 185 | 185 | 185 | 185 | 185 | (55) | (55) |
| 6. Married Pensioner born before 6/4/1938 | 0 | 231 | 326 | 340 | 232 | 232 | 232 | 232 | 232 | 232 | (8) | (8) |
| 7. Single Retired Pensioner born between 6/4/1938 and 5/4/1948 | 0 | 20 | 120 | 120 | 224 | 224 | 224 | 224 | 224 | 224 | (16) | (16) |
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.
Where relevant an election to transfer the maximum unused personal allowance (up to £1,060) to spouse in 2015/16 has been made.
Scenarios 6 and 7 assume all income is pension income so the extension and reduction in the savings rate band is not relevant. However, pensioners with non-savings income of less than £15,600 will benefit from this change if they also receive savings income. For example, a pensioner couple each receiving pension of £6,000, and savings income of at least £9,600, will further benefit by £712 per person as a result of the 0 per cent savings rate band of £5,000 in 2015/16. This assumes that there is no other non-savings income and does not take into account the age related personal allowance.
Change represents the difference between 2014/15 and 2015/16.
Making changes: Chancellor George Osborne announced changes to income tax rates and national insurance
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 assumed to be earned by one person.
Scenario 7:
Pension credits excluded.
If born after 6 April 1948, no entitlement to age-related allowance.
| Tax Allowances | |||
|---|---|---|---|
| 2014/15 | 2015/16 | ||
| Personal allowance (born after 6 April 1948)1 | £10,000 | £10,600 | |
| Personal allowance (born between 6 April 1938 and 5 April 1948)1,2 | £10,500 | £10,600 | |
| Personal allowance (born before 5 April 1938)1,2 | £10,660 | £10,660 | |
| Married couple’s allowance (spouse born before 6 April 1935)3 | £8,165 | £8,355 | |
| 20% basic rate band from | £10,000 | £10,600 | |
| 40% higher rate band from | £41,865 | £42,385 | |
| 45% additional rate band from | £150,000 | £150,000 | |
| Age related allowance restricted from | £27,000 | £27,700 | |
| Class 1 National Insurance lower rate | 12% | 12% | |
| On amounts (per week): | £153-£805 | £155-£815 | |
| Class 1 National Insurance higher rate | 2% | 2% | |
| On amounts (per week): | Over £805 | Over £815 | |
| Class 4 National Insurance lower rate | 9% | 9% | |
| On amounts from: | £7,956 pa | £8,060 pa | |
| Class 4 National Insurance higher rate | 2% | 2% | |
| On amounts over: | £41,865 pa | £42,385 pa |
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 £27,000 for 2014/15 (27,700 in 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 £3,140 in 2014/15 (£3,220 in 2015/16). Tax relief is given at 10 per cent.
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