With the 2015/2016 tax year now behind us, we now look ahead to the expected changes in personal tax allowance in the coming year. As it stands, there’s good news for both low- and high-income earners.
The personal allowance, below which no income tax is paid, will increase to £11,500 in April 2017. This is £300 more than the initial projection of £11,200. The £500 rise from the 2015/2016 allowance works out to a £100 tax saving for everyone who earns over £11,500 a year.
Under the watch of George Osborne, the personal allowance has risen from £6,475 to £10,600. This has resulted in millions of tax payers falling out of the basic rate of income tax entirely.
According to a study by The Institute for Fiscal Studies, the proportion of working-age adults who do not pay income tax has risen from 34.3% to 43.8% – about 23 million people.
Higher income earners will also receive some relief as the threshold for the 40% tax rate increases to £45,000 in April 2017. This, like the minimum threshold, exceeds initial projections. The £2,000 rise in the starting point for 40% tax means a £400 annual saving for everyone who earns between £45,000 and £100,000.
Government has said it is committed to further raising the threshold for higher income earners, aiming for £50,000 by 2020.
The good news? If you earn £55,000 a year, your tax bill – including National Insurance – will fall from £17,874 this year to £17,733 in 2016/17 and again, to £17,433 in 2017/18.