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| Higher rate UK taxpayers gain most in budget changes | Higher rate UK taxpayers gain most in budget changes |
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| Higher rate taxpayers will be £340 a year better off after budget changes to income tax, but lower earners will gain just £70 and those on universal credit just 50p a week, as the chancellor rejected accusations that the well-off do not pay enough tax. | Higher rate taxpayers will be £340 a year better off after budget changes to income tax, but lower earners will gain just £70 and those on universal credit just 50p a week, as the chancellor rejected accusations that the well-off do not pay enough tax. |
| The personal allowance – that part of your pay not liable for income tax – will go up to £11,850 from April next year, a £350 increase from the current level. The rise will help Philip Hammond meet the Conservative election pledge to raise the allowance to £12,500 by 2020. In practice, it turns into a £70 saving for a basic rate taxpayer, as it means that £350 more of their income is not liable to 20% income tax. | The personal allowance – that part of your pay not liable for income tax – will go up to £11,850 from April next year, a £350 increase from the current level. The rise will help Philip Hammond meet the Conservative election pledge to raise the allowance to £12,500 by 2020. In practice, it turns into a £70 saving for a basic rate taxpayer, as it means that £350 more of their income is not liable to 20% income tax. |
| In his speech, Hammond described the rise in the personal allowance as “making progress towards our manifesto commitments. The typical basic rate taxpayer will be £1,075 a year better off compared to 2010.” | In his speech, Hammond described the rise in the personal allowance as “making progress towards our manifesto commitments. The typical basic rate taxpayer will be £1,075 a year better off compared to 2010.” |
| But the Low Incomes Tax Reform Group said that universal credit recipients would barely notice the benefit. “For many, this is a welcome announcement as it will mean they have more cash in their pockets, however it does little to help those on the lowest incomes.” | But the Low Incomes Tax Reform Group said that universal credit recipients would barely notice the benefit. “For many, this is a welcome announcement as it will mean they have more cash in their pockets, however it does little to help those on the lowest incomes.” |
| It said that under the tax credits system, claimants would see the full benefit of the increase in the personal allowance. “However, those with incomes above £11,500 who are receiving universal credit will most likely see a reduction in their benefit. Instead of gaining £70 a year from the increased personal allowance, they will only gain overall by £25.90 as their universal credit will be reduced by £44.10. In other words, they only gain 37% of the benefit of any increase in the personal allowance.” | It said that under the tax credits system, claimants would see the full benefit of the increase in the personal allowance. “However, those with incomes above £11,500 who are receiving universal credit will most likely see a reduction in their benefit. Instead of gaining £70 a year from the increased personal allowance, they will only gain overall by £25.90 as their universal credit will be reduced by £44.10. In other words, they only gain 37% of the benefit of any increase in the personal allowance.” |
| Higher rate taxpayers will benefit from a £1,350 rise in the point at which 40% tax begins, with the threshold moving up from £45,000 to £46,350. In practice, this works out as a gain of £270 a year, as £1,350 more of someone’s earnings are taxed at 20% rather than 40%. Once added to the £70 from the personal allowance, the total gain is £340 a year. | Higher rate taxpayers will benefit from a £1,350 rise in the point at which 40% tax begins, with the threshold moving up from £45,000 to £46,350. In practice, this works out as a gain of £270 a year, as £1,350 more of someone’s earnings are taxed at 20% rather than 40%. Once added to the £70 from the personal allowance, the total gain is £340 a year. |
| The benefit of the personal tax allowance is gradually removed on incomes over £100,000, so that the total income tax gainon earnings over £123,700 falls to £200. | The benefit of the personal tax allowance is gradually removed on incomes over £100,000, so that the total income tax gainon earnings over £123,700 falls to £200. |
| Hammond kept the highest rate of tax at 45%, saying in his speech that “the top 1% are paying a larger share of income tax than at any time under the last Labour government.” | Hammond kept the highest rate of tax at 45%, saying in his speech that “the top 1% are paying a larger share of income tax than at any time under the last Labour government.” |
| National Insurance rates were raised broadly in line with the Consumer Price Index. The starting point for NI, which is levied at a rate of 12%, will increase from £8,164 to £8,424. Patricia Mock of accountants Deloitte said: “Taking account of NICs, a basic rate taxpayer will see an overall reduction of £101 (income tax reduction £70 and NIC reduction £31), and a higher rate taxpayer will see a net reduction of £236 (tax reduction £340 and NIC increase of £104). Those with income over £123,700 will see a net reduction of £96 (tax reduction of £200 and NIC increase of £104)”. | National Insurance rates were raised broadly in line with the Consumer Price Index. The starting point for NI, which is levied at a rate of 12%, will increase from £8,164 to £8,424. Patricia Mock of accountants Deloitte said: “Taking account of NICs, a basic rate taxpayer will see an overall reduction of £101 (income tax reduction £70 and NIC reduction £31), and a higher rate taxpayer will see a net reduction of £236 (tax reduction £340 and NIC increase of £104). Those with income over £123,700 will see a net reduction of £96 (tax reduction of £200 and NIC increase of £104)”. |
| The chancellor also announced a boost to the lower-paid in the form of a 4.4% increase in the national living wage, which will rise from £7.50 to £7.83 an hour from April 2018. Hammond unveiled what he said were the biggest increases in minimum wages for young people in a decade, which will boost the pay of working teenagers by between 15p and 30p an hour. | The chancellor also announced a boost to the lower-paid in the form of a 4.4% increase in the national living wage, which will rise from £7.50 to £7.83 an hour from April 2018. Hammond unveiled what he said were the biggest increases in minimum wages for young people in a decade, which will boost the pay of working teenagers by between 15p and 30p an hour. |
| The national minimum wage is the minimum that almost all workers are entitled to, while the national living wage, introduced in 2016, is higher – workers receive it if they are over 25. | The national minimum wage is the minimum that almost all workers are entitled to, while the national living wage, introduced in 2016, is higher – workers receive it if they are over 25. |
| The Treasury said the boost to the national living wage was equivalent to a pay rise of £600 a year for a full-time employee, and added that the Low Pay commission (LPC) estimated the move would benefit more than 2 million workers. | The Treasury said the boost to the national living wage was equivalent to a pay rise of £600 a year for a full-time employee, and added that the Low Pay commission (LPC) estimated the move would benefit more than 2 million workers. |
| The government said it would also accept all of the LPC’s recommendations on national minimum wage rates. This means that the rate for 21- to 24-year-olds will rise by 4.7%, from £7.05 to £7.38 an hour; the rate for 18- to 20-year-olds will go up by 5.4%, from £5.60 to £5.90 an hour; that for 16- to 17-year-olds will increase by 3.7%, from £4.05 to £4.20 an hour; while the rate for apprentices is going up by 5.7%, from £3.50 to £3.70 per hour. | The government said it would also accept all of the LPC’s recommendations on national minimum wage rates. This means that the rate for 21- to 24-year-olds will rise by 4.7%, from £7.05 to £7.38 an hour; the rate for 18- to 20-year-olds will go up by 5.4%, from £5.60 to £5.90 an hour; that for 16- to 17-year-olds will increase by 3.7%, from £4.05 to £4.20 an hour; while the rate for apprentices is going up by 5.7%, from £3.50 to £3.70 per hour. |
| Hammond said these changes, combined with increases in the personal allowance, meant this government was “delivering for Britain’s workers”, adding that a full-time worker on the national living wage would take home more than £3,800 extra compared with 2010, if personal allowance increases were also taken into account. | Hammond said these changes, combined with increases in the personal allowance, meant this government was “delivering for Britain’s workers”, adding that a full-time worker on the national living wage would take home more than £3,800 extra compared with 2010, if personal allowance increases were also taken into account. |
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