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Question Of The Week: Personal Tax Allowance Increase
Former_MSE_Natasha
Posts: 672 Forumite
Q. The new Govt's suggested increasing the 0% income tax limit to £10,000. If you earn say £10,100 per year, will you be taxed on the lot or just the bit above £10,000? If it's the first is it worth earning more as you'll be worse off. Debbie, by email
Martin's A: This scares many new taxpayers, but thankfully few taxes work that way (except stamp duty). With income tax you only pay the higher amount above the threshold. So if it were tax free until £10,000 and 20% above, you'd just pay £20 tax (20% of £100).
Of course it's unlikely that the full £10,000 'personal allowance' will come into force after the 22 June budget, though it's likely to rise from the current £6,475. See the income tax checker for more info.
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Martin's A: This scares many new taxpayers, but thankfully few taxes work that way (except stamp duty). With income tax you only pay the higher amount above the threshold. So if it were tax free until £10,000 and 20% above, you'd just pay £20 tax (20% of £100).
Of course it's unlikely that the full £10,000 'personal allowance' will come into force after the 22 June budget, though it's likely to rise from the current £6,475. See the income tax checker for more info.
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