Autumn Statement Personal Allowance Increase

Autumn Statement Personal Allowance Increase and Changes to Higher Rate Tax Threshold.

Transcript:

So it’s the 3^rd December and just about an hour ago the Chancellor, George Osborne, finished his autumn statement.  Essentially the mini budget, pre-budget report and I've been analysing it as quickly as I can to get some information as it obviously affects us all.  So here is the first topic and it’s the topic of personal allowances.

So first things first and with the personal allowance currently we have a £10,000 per annum personal allowance that’s the element of our pay that we pay no tax on and then the next £31,865 so taking it up to a higher rate tax threshold £41 865, that band there, we pay basic rate tax.  Anything above £41,865 we’re into higher rate tax.

So originally proposed, the personal allowance with effect April 2015 would increase from £10,000 to £10,500.  Now the Chancellor made a big “hoo/haa” in his speech of increasing it even further to say the personal allowance will be increased from £10,000 to £10,600 and then talking about: right everybody's going to be better off, higher rate taxpayers are better off because that personal allowance increased to £10,600 affects us all.

And then what he threw in there was a figure of the higher rate threshold would then start at £42,375. £42 375.  So doing the numbers £10,600 is now annual rate band £31,875 is now the basic rate band and £42,375 is when we start paying higher rate tax.

All seems pretty good but what that really means is: ‘yes everybody's had the personal allowance increased from £10,000 will get it to £10,600. However the band for basic rate where higher rate tax starts, where remember I said it was £41,865 going out to £42,375, that hasn't gone up by £600, that's actually gone up by £520.

So in reality the basic rate tax band has been squeezed a little bit. So yes we are all better off, yes we all had the personal allowance increased to £10,600 however, higher rate taxpayers and the additional rate taxpayers: you’re not as better off as a basic rate taxpayer or somebody falling into the none rate tax.

So I don't necessarily think that's a good thing or a bad thing but it's just interesting the ‘spin’ that they put on it.  But the ‘long and the short’ for all of us: personal allowance will be £10,600 and then the next £31,775 will be subject to basic rate tax of 20% and then the starting rate for higher rate tax is £520 higher not 600 at £42 375 so that explains personal allowance changes will be better off we'll all be better off definitely but higher rate taxpayers won't be as better off as basic rate taxpayers are lower and not rate taxpayers.  Thanks very much for watching.”