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Tax Codes – New Tax Year

Government increases personal allowance and lowers higher rate threshold

Tax Codes 2013/2014 tax year.

In 2013 the government is to increase personal tax free allowance by over £1000. The new increase takes personal allowance from £8105 up to £9440.

The changes in personal allowance will see most basic rate taxpayers saving in the region of £170 a year and higher rate taxpayers saving £42.50. The changes will take effect from the 6 April 2013.

At the same time the threshold for paying the 40% higher tax rate will be lowered from £42,475 to £41,450. The basic rate limit is also set to be changed, being reduced from 34,370 to £32,245 in 2013/2014.

The 50% tax band which only applies when income is over £150,000 will drop to 45% in the new tax year.

The UK’s chancellor has spoken of the target he hopes to meet by 2015 whereby income tax personal allowance will have reached £10,000. He claims the recent Government increase is in line with this aim.

Deputy Prime Minister Nick Clegg, in the lead up to the Budget, called for the coalition to raise the personal allowance more quickly in order to reach the 2015 target.

The government has predicted that, by April of this year, the increases in personal allowance will mean that 2 million people who currently pay income tax will no longer be required to.

 

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