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| Personal allowance to rise to £10,000, taking 3 million people out of tax | Personal allowance to rise to £10,000, taking 3 million people out of tax |
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| The personal tax allowance will rise to £10,000 in 2014 in a move that will make basic-rate taxpayers £112 better off and take as many as 3 million people out of the tax net as George Osborne fulfilled a budget ambition long cherished by his Liberal Democrat coalition partners. | The personal tax allowance will rise to £10,000 in 2014 in a move that will make basic-rate taxpayers £112 better off and take as many as 3 million people out of the tax net as George Osborne fulfilled a budget ambition long cherished by his Liberal Democrat coalition partners. |
| The personal allowance, which is the first part of earnings on which there is no tax to pay, is already scheduled to jump markedly on 6 April, from £8,105 to £9,440, and will now rise to £10,000 in April 2014, one year earlier than planned. | The personal allowance, which is the first part of earnings on which there is no tax to pay, is already scheduled to jump markedly on 6 April, from £8,105 to £9,440, and will now rise to £10,000 in April 2014, one year earlier than planned. |
| The chancellor said: "From 2014, there will be no income tax at all on the first £10,000 of your salary. That's £700 less in tax for working families than when this government came to office. Almost three million more of the lowest paid will pay no income tax at all. It's a historic achievement for this government and for hard-working families across the country." | The chancellor said: "From 2014, there will be no income tax at all on the first £10,000 of your salary. That's £700 less in tax for working families than when this government came to office. Almost three million more of the lowest paid will pay no income tax at all. It's a historic achievement for this government and for hard-working families across the country." |
| But some of the tax giveaway will be clawed back by a further reduction in the starting point for the 40% tax rate, which will come down from £32,010 to £31,865 to tie in with the introduction of the £10,000 allowance. Since becoming chancellor, George Osborne has increased the number of 40% taxpayers from three million to nearly four million, and the reduced starting point for the tax is expected to drag in another 400,000 people. | But some of the tax giveaway will be clawed back by a further reduction in the starting point for the 40% tax rate, which will come down from £32,010 to £31,865 to tie in with the introduction of the £10,000 allowance. Since becoming chancellor, George Osborne has increased the number of 40% taxpayers from three million to nearly four million, and the reduced starting point for the tax is expected to drag in another 400,000 people. |
| Patricia Mock, tax director at Deloitte, said better-off taxpayers would benefit more from the introduction of the £10,000 allowance than those lower down the income scale: "It means a higher-rate taxpayer will benefit by up to £195 from the combined change, more than a basic-rate taxpayer who will be £112 better off. This contrasts with the increase to £9,440 due to come into force for 2013-14 where the changes are more beneficial for basic-rate taxpayers, who will save up to £267, whereas higher rate taxpayers will benefit by up to £62." | Patricia Mock, tax director at Deloitte, said better-off taxpayers would benefit more from the introduction of the £10,000 allowance than those lower down the income scale: "It means a higher-rate taxpayer will benefit by up to £195 from the combined change, more than a basic-rate taxpayer who will be £112 better off. This contrasts with the increase to £9,440 due to come into force for 2013-14 where the changes are more beneficial for basic-rate taxpayers, who will save up to £267, whereas higher rate taxpayers will benefit by up to £62." |
| At the top end of the income scale, anyone earning over £120,000 will not benefit at all, as the allowance is tapered away. "In 2013/14 these taxpayers will see a tax increase of £472, with a further increase of £29 in April 2014," said Mock. | At the top end of the income scale, anyone earning over £120,000 will not benefit at all, as the allowance is tapered away. "In 2013/14 these taxpayers will see a tax increase of £472, with a further increase of £29 in April 2014," said Mock. |
| Despite the rise in personal allowances, the overall impact of tax and benefit changes is likely to be negative, according to a "distributional analysis" issued by the Treasury after the budget. It showed that the cumulative impact in cash terms for the bottom 10% of households from tax, tax credit and benefit measures in 2013-14 would result in a £200 reduction in incomes for the poorest group in society, although there will be a small increase for those on middle and upper-middle incomes. | Despite the rise in personal allowances, the overall impact of tax and benefit changes is likely to be negative, according to a "distributional analysis" issued by the Treasury after the budget. It showed that the cumulative impact in cash terms for the bottom 10% of households from tax, tax credit and benefit measures in 2013-14 would result in a £200 reduction in incomes for the poorest group in society, although there will be a small increase for those on middle and upper-middle incomes. |
| The squeeze on average incomes will continue for many years to come, according to a separate analysis of the Office for Budget Responsibility (OBR) figures by the Resolution Foundation prepared for the Guardian. "The squeeze will look worse over the next few years than previously feared: wages will fall further relative to prices and recover more slowly," said James Plunkett, director of policy at Resolution. | The squeeze on average incomes will continue for many years to come, according to a separate analysis of the Office for Budget Responsibility (OBR) figures by the Resolution Foundation prepared for the Guardian. "The squeeze will look worse over the next few years than previously feared: wages will fall further relative to prices and recover more slowly," said James Plunkett, director of policy at Resolution. |
| Median pay for employees, which stood at £24,800 in 2009, will fall to £21,600 by 2015 after taking into account inflation, a drop of 13%. "Prior to today's new OBR data, the projection for 2017 stood at £21,800. Today's gloomier projections therefore see the 'wage gap' (the difference from the pre-recession peak) increasing from £3,000 in 2017 to £3,200," said Plunkett. | Median pay for employees, which stood at £24,800 in 2009, will fall to £21,600 by 2015 after taking into account inflation, a drop of 13%. "Prior to today's new OBR data, the projection for 2017 stood at £21,800. Today's gloomier projections therefore see the 'wage gap' (the difference from the pre-recession peak) increasing from £3,000 in 2017 to £3,200," said Plunkett. |
| The continuing intense pressure on living standards was confirmed in official figures released hours before the budget. The Office for National Statistics said pay rose by 1.2% in the year to January 2013, compared to the 2.7% rise in inflation over the same period, meaning households had less to spend. | The continuing intense pressure on living standards was confirmed in official figures released hours before the budget. The Office for National Statistics said pay rose by 1.2% in the year to January 2013, compared to the 2.7% rise in inflation over the same period, meaning households had less to spend. |
| "With earnings growth limited to 1% in January itself, pressure on people's purchasing power has intensified recently given that consumer price inflation has risen back up to a nine-month high of 2.8% in February and could well move above 3% for much of 2013," said the economist Howard Archer of IHS Global Insight. | "With earnings growth limited to 1% in January itself, pressure on people's purchasing power has intensified recently given that consumer price inflation has risen back up to a nine-month high of 2.8% in February and could well move above 3% for much of 2013," said the economist Howard Archer of IHS Global Insight. |
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