It’s so important to know exactly how the budget is going to impact on YOUR pocket!
As we all know, there is a certain amount of money the government so kindly allows us to earn before we must pay income tax. This is called our personal allowance.
From April 2019 that is increasing from £11,850 to £12,500. In monetary terms, as that is the threshold before we start being taxed at 20%, it means an extra £130 in your pocket each year.
There had been talks of this previously, but the chancellor has decided to introduce this a year early meaning next year this is frozen and form there on it will rise along with inflation. This means that when wages increase due to inflation you aren’t forced into the next tax band.
Similarly, the next tax bracket is going up too. The previous amount of earnings before you started being taxed at 40% was £46,350. This will be increased to £50,000 so if your earnings are over that you should see the benefit of an additional £730 in your back pocket.
It’s important to state at this point that for higher earning individuals your personal allowance (mentioned above) is withdrawn by £1 for every £2 of adjusted net income* earnt over £100,000. Therefore when the new personal allowance is introduced all taxpayers earning between £100,000 and £125,000 will pay tax at around 60%.
The national living wage will also see a rise of almost 5% from £7.83 to £8.21. This is effective minimum wage for anyone aged 25 or over.
Don’t worry if you are too young to see this benefit as the national minimum wage rates are increasing too. The new rates will be £7.70 for 21-24 year olds, £6.15 for 18-20 year olds, £4.35 for school leavers under 18 and £3.90 for apprentices.
If you have any questions or would like to know how these new rates will affect, you please get in touch with the team today on 01482 646440.
*Adjusted net income is your total taxable income less tax reliefs you may be eligible for.