At the Budget, the Chancellor announced that increases to the personal allowance and basic rate band for 2019/20. How much tax you pay in each tax year depends on how much of your income is above your Personal Allowance and how much of your income falls within each tax band. Therefore changes to these thresholds can put more money in your pocket.
The personal allowance is currently £11,850 this will rise to £12,500 for 2019/20. Also for 2019/20, the basic rate band will be increased to £37,500 so that the threshold at which the 40% band applies is £50,000. The additional rate of tax of 45% will remain payable on taxable income above £150,000.
Effects of personal tax changes
This measure will reduce Income Tax for 30.6 million Income Tax payers in 2019 to 2020 (30.7 million in 2020 to 2021). This includes low and middle income individuals, improving incentives to enter employment and increasing real household disposable incomes. This might feed through to higher consumption or savings in the household sector.
In terms of actual real gains with the changes a basic rate taxpayer will have an average real gain of £66. A higher rate taxpayer will have an average real gain of £387. An additional rate taxpayer will have an average real gain of £236.
The above inflation increase will take 499,000 individuals out of Income Tax, and 479,000 individuals out of higher rate Income Tax in 2019 to 2020 compared to previously announced policy.
If you need help with tax then speak to Chartered accountants that you can trust. D E Ball Limited have a personal tax team located in the Telford and Shropshire area who offer a key service to clients in the area of taxation planning, aimed at minimising your future tax liabilities.