Budget changes to personal tax allowances
In his Budget today, the Chancellor announced that the basic income tax personal allowance will be £10,000 in the tax year 2014/15.
This change had been widely rumoured in advance, and fulfils the Government’s stated aim of increasing the allowance to £10,000 before the end of the current parliament.
The basic personal allowance is available to people born on or after 6 April 1948. In the current year, 2012/13, it is £8,105; in 2013/14 (as previously announced) it will be £9,440. Once the personal allowance has reached £10,000, it will then increase in line with inflation (based on the Consumer Prices Index) in future years, starting from 2015/16.
As announced in the 2012 Autumn Statement, the higher rate income tax threshold, which equals the sum of the personal allowance and the basic rate limit, will be increased by 1% to £41,865 in 2014/15. Therefore the basic rate limit will be £31,865 in 2014/15.
Those born before 6 April 1948 are currently entitled to higher, age-related personal allowances. As previously announced, from 2013/14 these allowances will be frozen at their 2012/13 levels until they align with the basic personal allowance. The age-related allowances are £10,500 for those born after 5 April 1938 and before 6 April 1948, and £10,660 for those born before 6 April 1938.
A Budget Tax Information and Impact Note explains more about the changes to the allowances.