Contributed by ACCA, in their own words
Changes to personal allowances for basic and higher rate taxpayers revealed.
As already announced, for 2014/15 the personal allowance will be £10,000. It has now been announced that this will increase further to £10,500 in 2015/16.
The Finance Bill 2014 will introduce legislation that will override amounts set out in the Indexation Order 2013 for the personal allowance for those born after 5 April 1948 and also the basic rate limit for tax year 2014/15. For the first time since 2009/10, the higher rate threshold has been increased, from £41,450 in 2013/14 to £41,865 in 2014/15. It is proposed to increase the threshold further to £42,285 for 2015/16.
Income Taxes Act 2007 requires the government to increase personal allowances and rate limits by the annual percentage increase in the Retail Prices Index (RPI) for the year to September preceding the new tax year. Excluded from this general annual increase are:
- the £150,000 higher rate limit
- the £100,000 personal allowance income limit
- the personal allowances for people born before 6 April 1948.
The government made the Order for 2014/15 on 5 December 2013, and this is the Order that will be over-ridden by Finance Bill 2014.
The Finance Bill 2014 will implement the government’s intention to refer to the Consumer Prices Index (CPI) in future, as opposed to the RPI when looking at indexation of income tax allowances and limits. The annual percentage increase that will provide the basis for indexation for 2015/16 will be published in late 2014.