News: April 2013

Personal allowance and tax bands

Personal Allowance

This is fixed for 2013/14 as £9,440 if you were born after 5 April 1948 and for 2014/15 it is the long-planned £10,000. After that it will just go up by reference to the CPI.

Tax bands

The basic rate limit is £32,010 for 2013/14 and £31,865 for 2014/15. This means that if you are a 40% taxpayer (if taxable income does not exceed £100,000) you will only partially benefit from the increase in personal allowance.

The 45% band for 2013/14 applies to taxable income over £150,000.

Personal allowance trap

As you may know, there is a nasty tax trap by reference to the gradual withdrawal of the personal allowance if your taxable income exceeds £100,000.This is via a reduction of £1 of allowance for every £2 of excess taxable income.

For 2013/14 the trap potentially applies to even more taxpayers with the increase in personal allowance to £9,440:

For 2014/15 the trap is even wider with the increase in personal allowance to £10,000:

If you think you could fall within this trap we can advise you of all possible ways of keeping well clear.