The Conservatives seem to be falling good on their promise. They previously announced that the federal income tax free allowance will be increased to £12,000 by April of 2020. And judging by this year’s budget, the changes are being made towards right target.

Quite a few changes have been made to tax brackets too. While previously the higher tax rate of 40% applied to income of £45,000 and above, the threshold has been increased to £46,350 for tax year 2018/19.

And by April 2020, this threshold will be increased to £50,000. The UK Government has been set on increasing the allowances and making changes to UK tax brackets since 2010/11. This has been a significant departure from tax regime of coalition government.

A typical tax payer now saves up to £1,075 in taxes per year. Tax payers in federal tax bracket of 20% will save £70 whereas the tax payers of 40% bracket will save £340 a year after successful implementation of the new tax policy.

Reviewing back, the personal allowance has been changed significantly since 2010/11 when it was only £6,475. The higher tax rate threshold was £43,875 back then. While some tax payers  have welcomed the new tax regime, others complain of heavy tax burdens in name of other taxes.

The new budget has not made any change to income tax brackets for earnings above £150,000. The rate (45%) and the threshold will remain same. Likewise, tapered reduction of personal allowances between £100,000 to £123,000 will be intact.

The tax free amount will be diminished by £1 for ever £2 over and above 1£100,000. And those earning above £123,000 will not have luxury of personal allowance at all. While low income groups applaud the move,  The higher income band earners are not very happy.

The Reason? The new tax system puts a greater burden on high income earners. An estimate is that the top 1% high earners will have to pay 30% of the country’s entire tax. So amid mix reactions, people of UK receive the tax budget 2018/19.

If you want to know further about what are the tax brackets or what is tax due on you, you can contact Certax Fitzrovia Ltd. We provide quality tax consultancy and accounting services at affordable prices.

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