Happy new year... well, new tax year that is!
Yes today marks the start of the 2013/2014 tax year and as we wave goodbye to the end of 2012/2013, let's start looking forward to some of the upsides the new tax year brings.
Income Tax Changes For 2013/2014
People born after 6th April 1948 (Under 65) can look forward to an increase in their personal tax free allowance of £1,335. At 20% basic rate tax, this is worth £267 in saved tax. In this new tax year you can earn up to £9,440 before you will be liable to any income tax - however, there is a £2,720 reduction from where the higher rate band starts so you might be paying 40% tax on some of your income this year. The higher rate band now starts at £32,010 rather than the £34,370 it was last year.
The standard tax code for 2013/2014 will be 944L - equating to the £9,440 personal allowance.
People earning above £150,000 will have cause to smile with the top rate of tax now 45% rather than the 50% it was last year. Accordingly, the dividend top rate has also dropped to 37.5% from last year's 42.5%.
National Insurance Changes For 2013/2014
If you are employed your national insurance contributions start a little later (£152) compared to last year, annualised this is from £7,592 to £7,748 for the lower threshold. The higher threshold has been reduced from £42,284 to £41,444, a difference of just over a thousand pounds. Good news, as above the higher threshold, the NI rate is just 2%, compared to 12% for below it.
Self employed, you will see similar changes, with the lower threshold rising by £150 to £7,755 from £7,605 and the higher threshold dropping by £1,025 to £41,450 from £42,475. Your weekly class 2 contributions increase by 5 pence to £2.70.
Student Loan Threshold 2013/2014
You now start making contributions toward your student loan once your income exceeds £16,365 - an increase (inflationary) of £570.
Head over to the tax calculator to see how your income could be affected for single or multiple income sources - click here