George Osborne revealed the personal allowance will increase by £500 to £10,500 on 6 April 2015. This is good news for the low paid and the amount at which people start to pay higher rate tax will be £42,285 (up from £41,865). This actually means the basic rate limit has only been increased by £420. In real terms he’s committing to giving basic rate taxpayers an extra £84 which isn’t in line with inflation and it is expected the higher rate threshold will continue to be reduced to pay for the personal allowance increase.
Individuals whom earn £42,000 will find themselves higher rate tax payers next month and will pay 40% income tax on overtime, property rental profits, interest on savings.
If you’re affected; contact a member of our personal tax team to discuss your income tax liability.