Tax Rebates & Refunds

Personal allowance for income tax to rise to £10k in 2014

March 20, 2013
Posted in Income Tax — Written by Chris

One of the biggest announcements in the new Budget, unpacked by Chancellor George Osborne today, was that the Personal Allowance threshold for income tax is to rise to nearly £10,000.

The personal allowance – the amount you can earn in a tax year before you start paying basic rate tax – will rise from £8,105 to £9,440 on April 6th 2013. By April 2014, it will rise to £10,000. This change means that from the start of the 2014 tax year, as many as three million workers will pay no income tax at all to HMRC, the department responsible for processing income tax and tax rebate claims.

The measure aims to help struggling low-income households through tough economic times, but it will also benefit higher-rate taxpayers. This is because the threshold at which people start paying higher-rate income tax will also be dropped to £41,865 at the same time that the Personal Allowance for basic rate tax increases. This is expected to benefit higher-rate taxpayers by around £82 a year.

Explaining how the new measure will benefit people saving for pensions in particular, retirement expert Vince Smith-Hughes said:

“Raising the personal income tax allowance to £10,000 from April 2014 is great news for pension savers,”

“Pensions are one of the most tax-efficient savings vehicles available but these efficiencies are not just limited to tax-relief on pensions savings.”

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