Autumn Budget 2018 – Income Tax Rates & Allowances
Topic:-Autumn Budget 2018 and Income Tax Rates & Allowances
The Chancellor has confirmed that from 2019-20 the personal allowance will increase to £12,500 (an increase from the current £11,850 allowance) and the basic rate limit to £37,500. As a result, the higher rate threshold will increase to £50,000 from April 2019.
These increases deliver on the government’s manifesto commitment to increase the basic personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of the current Parliament a year ahead of schedule. The Chancellor also set the personal allowance at £12,500 and basic rate limit at £37,500 for 2020-21 and confirmed that from 2021-22 onwards, the personal allowance and basic rate limit will be indexed with the Consumer Price Index (CPI).
The changes to the basic rate limit will apply to non-savings and non-dividend income in England, Wales and Northern Ireland and to savings and dividend income in the UK. Since April 2017, the Scottish Parliament sets the basic rate and higher rate thresholds for non-savings and non-dividend income in Scotland.
For high earning taxpayers the personal allowance is gradually withdrawn by £1 for every £2 of adjusted net income over £100,000 irrespective of age. Adjusted net income is total taxable income before any personal allowances, less certain tax reliefs such as trading losses and certain charitable donations and pension contributions. Any taxpayers with an adjusted net income of between £100,000 and £125,000 in 2019-20 will pay an effective marginal rate of tax of around 60% as the tax-free personal allowance is gradually withdrawn.
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