The new tax year brings with it a mixed bag of news for employers, employees, and business owners. But it appears in most cases, the only way is up.
Normally, Income Tax and National Insurance (NI) rate thresholds go up in line with inflation. These thresholds tell us when we normally start paying Income Tax. For now, they remain frozen until 2028.
This means a hit for taxpayers across the board. Wage rises linked to inflation are pushing more and more earners into paying income tax, either for the first time or into higher tax brackets.
According to figures published by the Institute of Fiscal Studies (IFS), a basic rate taxpayer will pay around £500 more in tax this year. For a higher rate taxpayer, it will be around £1,000.
People on lower incomes will receive some succour as most benefits increase The State Pension will increase by 10.1 per cent, amounting to some £750 over the year. Single people receiving Universal Credit will receive £400 more. People receiving means-tested benefits will get enhanced cost-of-living payments worth £900 over the next year.
Higher Rate Earners
The lowering of the additional-rate threshold for Income Tax from £150,000 to £125,140 is a significant change announced in the Autumn Statement, that comes into effect this month.
Aligning the additional rate tax threshold with the personal allowance taper means that individuals with an income of £125,140 or higher will lose their entire personal allowance.
The Personal Allowance is the amount of income you can earn before you start paying Income Tax. Under current legislation, the personal allowance is reduced by one pound for every two pounds of net income above £100,000.
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