The recent 2015 Budget will benefit 100,000 taxpayers who will be removed from the higher rate tax threshold. Other tax changes have also been announced to benefit UK taxpayers. Chancellor George Osborne also made a number of pledges that would be introduced if the Conservatives are reelected in the General Election in May this year.
Rates and reasons
Currently, the higher rate threshold is set at £41,865, which means that income above this is taxed at the higher rate of 40%. The threshold will be increased at a rate which is above inflation, to £42,385 from April 2015. The threshold is set to increase again in April 2016 to £42,700 and again in April 2017 to £43,300. The Chancellor has stated that the Conservatives would like to see a threshold of £50,000 to aid middle-income earners.
According to Osborne, the changes are an indication of the direction of a Conservative government. He said:
“I was able to get that above-inflation increase in the higher rate and generally I think the package we’ve presented is a broadly Conservative package and it’s an indication of the kind of leadership and economic direction we’ll take under a Conservative government.”
According to a report in the Telegraph, millions have been forced to pay tax at the higher rate, which was originally meant to tax the wealthy. During the last 10 years, large numbers of nurses, teachers, and police officers have had to pay the higher rate of tax, with five million now in the higher rate bracket, in comparison to three million a decade earlier.
What are the other changes to tax?
The personal allowance will increase to £10,600 from 6th April 2015, meaning that 27 million taxpayers will benefit, including higher rate taxpayers, according to calculations produced by the Treasury. Around 3.7 million people on lower incomes will not pay tax in two years, as the personal allowance will be increased further.
National Insurance changes
The National Insurance Contributions paid by those who are self-employed are to be abolished. Class 2 contributions are paid by those who are sole traders or partners in a business if they earn above £58,885 per annum. From 1st April 2015, employers will no longer have to pay NI contributions for employees who are aged below 21, benefiting employers by an average figure of £332 for each employee.
For more information of how the 2015 Budget will benefit you, contact us here at The Accountancy Partnership.
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