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:
| Taxable income | Marginal rate |
|---|---|
| £100,000 to £118,880 | 60% |
| £118,881 to £149,999 | 40% |
| £150,000 + | 45% |
For 2014/15 the trap is even wider with the increase in personal allowance to £10,000:
| Taxable income | Marginal rate |
|---|---|
| £100,000 to £120,000 | 60% |
| £120,001 to £149,999 | 40% |
| £150,000 + | 45% |
If you think you could fall within this trap we can advise you of all possible ways of keeping well clear.
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