The start of the new tax year brings a fresh start to the various rates, allowances and bands that the Government sets each year. The 2014 tax year, which started yesterday 6th April, brings one of the headline grabbers from the previous UK Budget.
For 2014, the basic personal allowance will be £10,000 - so for the first £10,000 of income earned, no tax is payable. Some people are confused over the announcement in last month’s budget of the £10,500 personal allowance, however that increase is scheduled for April 2015. Still, £10,000 is a nice increase from 2013 of £560. Unfortunately, the national insurance bands start a little bit earlier at £7,956 so there is 12 percent on earnings between £153 and £805 to be paid in national insurance contributions.
Higher rate taxpayers will find the threshold at which they are into the 40 percent bracket occurs at £31,865 rather than £32,010. At £145 less than last year, the reduction does blunt the extra £560 in personal allowance a little.
Another aspect of tax free allowances, the married couple’s transferable allowance, was talked about in the Budget but won’t be seen until April 2015.
What about other taxes?
Capital Gains Tax sees an increase of £100 to the annual exempt amount. For 2014, gains of up to £11,000 are not liable to CGT.
The main rate of Corporation Tax sees a drop from 23 percent to 21 percent for 2014.
For a full list of rates and allowances, see our 2014 rates and allowances table.
The Budget mentioned pensions and savers?
The large scale change to the savings income tax rate and band (0% between £1 and £5,000) are not in effect until April 2015.
Even though the new tax year has started, the £15,000 NISA (new ISA) won’t be introduced until July 2014 - until then the full ISA has risen to £11,880.
Pensions changes were ushered in from 27th March 2014, a week after the Budget announcement.
People retiring will be able to draw income from their pension without making the compulsory annuity purchase. Investors could already take up to 25 percent of the pension pot as a tax-free lump sum, but now they are able to take further amounts - with the limits increased by 25 percent - whilst the pot remains invested. The flexible drawdown option has also had limits reduced by capping the income required to £12,000 - down from the previous £20,000.