Changes to the tax free Personal Allowance amount mean that most taxpayers should benefit from a bit of extra cash.
What is the tax free Personal Allowance?
The tax free Personal Allowance rate is the maximum amount you can earn, per tax year, before paying any income tax at all.
What are the changes in 2018?
The 2017-18 Personal Allowance rate is £11,500 and applies from April to April (the financial year). In April 2018, this is going up by £350 to £11,850 and applies until April 2019. This will mean your tax code will change with the standard 2018/2019 tax altering to become 1185L from 1150L.
How do they benefit me?
If you are a basic rate taxpayer, this means that you will get an extra £70 to yourself.
What about Higher Rate taxpayers?
The yearly amount you can earn before you have to start paying the Higher Rate of income tax is being raised in April 2018. The Higher Rate of income tax is currently 40% of any earnings over the threshold. In the 2017-18 tax year, anything over £45,000 is taxed at this 40%. In April 2018 this won’t apply until you are earning £46,350. This should work out at a saving of £240 over the year for Higher Rate taxpayers.
Is this the same everywhere in the UK?
The Personal Allowance amount is the same in all four UK countries. But the Scottish Government has the power to set its own tax bands and tax rates, so they need to be checked separately.
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