As announced in the budget last month, the biggest change for many will be the increase in the basic tax free personal allowance of £1,335 - which at the basic tax rate of 20 percent would be worth £267 per year in saved tax.
The increase to £9,440 from £8,105 would bring nearly 2 million people completely out of paying income tax, but those earning above £7,748 (£5,725 self employed) will still have to pay National Insurance Contributions - so not completely out of taxation then.
The Government is committed to aligning Income Tax and National Insurance, so hopefully with the target £10,000 personal tax free allowance from 2014, National Insurance starting bands will be the same level - really bringing people out of taxation at the lower end.
The stage at which higher rate tax is payable is to drop by £2,360, from £32,370 to £32,010. This will bring around 400,000 people into higher rate tax - who normally would be basic rate taxpayers.
It does however seem, compared to the previous 2012/2013 tax year, everyone born after 5th April 1948 is set to be pay less tax than last year up to around £118,000 where tax levels are higher by up to £200. Over £150,000 big savings are seen with someone earning £180,000 saving over £1,000 in tax compared to last year.
The reason, at the top end of the pay bracket, people earning over £150,000 will see their maximum tax rate drop from 50 percent to 45 percent.
Granny Tax?
The so called granny tax is effective with the normally higher personal allowances for people over 65 now frozen to last year's levels. With allowances now being date of birth based, rather than age, so phasing out the higher allowances.
What about other taxes?
- Capital gains band rates remain the same as 2012 with 18% for basic rate and 28% for higher/top rate. However the Annual Exempt Amount increases by £300 from £10,600 to £10,900.
- ISA's have a maximum limit of £11,520 - up £240. Cash ISA is now £5,760 and the same for the Stocks and Shares ISA. Junior ISA's are increased by £120 at £3,720.