These days the Autumn Statement normally covers such matters, leaving the Budget for next-tax-year-but-one announcements. Thus the £10,000 personal allowance for 2014/15 was already a fact and the Chancellor’s announcement of a £10,500 allowance for 2015/16 was so widely leaked as to be no real surprise. The starting points for higher rate tax in both years were already known: £41,865 in 2014/15 and £42,285 in 2015/16.
The sub-inflation increases in the higher rate threshold will mean that by 2015/16 there will be 5.3 million higher rate taxpayers, a 2 million increase over 2010/11 according to the Institute for Fiscal Studies (IFS).
While shrinking the basic rate band (by £145 for 2014/15 and £80 for 2015/16), Mr Osborne did the opposite with the starting rate band, which only applies to savings income:
- The band rises by £90 to £2,880 in 2014/15.
- In 2015/16 it will undergo a radical change, with the rate cut from 10% to 0% and the size of the band nearly doubled to £5,000.
The 2015/16 revisions is a mix of politics, smoke and mirrors. Ed Balls, the Shadow Chancellor, plans to reinstate a 10% starting band for all income, something his earlier boss (Gordon Brown) abolished, so Mr Osborne took delight in removing the 10% rate from the tax scales before the election. Mr Osborne’s revamp will potentially benefit only 1.5m taxpayers, with half gaining no more than £50 a year. How many actually benefit will depend upon the numbers that bother to reclaim tax deducted at source.
The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.