Budgets, Autumn Statement – it’s all a bit of a blur, really isn’t it? For most of us (if we’re being honest) it’s all just a load of money talk that most of us don’t really think about – after all, it’s not like we get much choice in the matter… But the announcement about raising the threshold of income tax, affects all of us and it’ll be a change that most of us will be able to relate to – so here’s what it means for you.
The current Personal Allowance income tax threshold is £11,000 – all this means is that you don’t get taxed on the first £11,000 of what you earn. From 2017-2018, that’s going to change and the threshold will be raised to £11,500; which is good news because it means as a result of that increase you’ll be £100 a year better off. And the point where you pay the higher rate of income tax will also increase – from £43,000 up to £45,000.
But these increases don’t stop there, the plan is for income tax thresholds to rise again and by 2020-2021, the Personal Allowance will be £12,500 and The Higher Rate threshold will increase to £50,000 (for higher rate tax payers who get taxed at a whopping 40% – ouch!)
It’s nothing new, as income tax thresholds have increased over the years, but it does show that the tax system is at least trying to play fair. It means that the bulk of tax (almost 90%) is paid by the wealthiest 50% of the population while the bottom 50% of earners, contribute just shy of 10%.
Of course, whether you’ll be able to spend the money you save in income tax on fun stuff, is another matter completely. A rise in prices and inflation means that you probably won’t feel like you’ve got loads of extra spends in your pocket; but hopefully you won’t be worse off.
Which is why (without sounding like your grandma) it’s important to try and save what you can (or spend it wisely). So, take a moment to suss out what savings accounts or cash ISAs might be good for you – even the government are on board with getting you to put a bit by, with their new three year National Savings and Investment (NS&I) bond with an expected yield of 2.2% on a maximum investment of £3,000.which launches next year. As the saying goes – look after the pennies and the pounds will look after themselves – best start saving then…