Can someone help me understand the budget?

Buzzybee90

Hi everyone,

I'm having some trouble understanding how the personal tax allowance increase is worked out. I've used two calculators and they've both said my OH and I will be better off by £272 so £136 each.

I feel really stupid asking, but can someone tell me how they got that figure?

Thank you!

tea_lover

It's most probably based on you both paying slightly less NI and income tax, as the amount you can earn before you start paying tax will increase.

Tixy

In the current year the personal allowance is £9440 and next year it will be £10000. That means you can earn an extra £560 which will not be taxed
£560 at 20% tax rate is £112.

The starting point for paying NI this year is £149 a week and next year will be £153 a week. Over a year that is £208 more of what you earn that you won't have to pay NI on. NI is at 12% so £24 saving.

So you will be £136 better off each (assuming you both earn more than £10k and less than £42k).

peachyprice

You can earn more before you start paying tax so your monthly take home pay will be £11 more.

Buzzybee90

Tixy wrote: »

In the current year the personal allowance is £9440 and next year it will be £10000. That means you can earn an extra £560 which will not be taxed
£560 at 20% tax rate is £112.

The starting point for paying NI this year is £149 a week and next year will be £153 a week. Over a year that is £208 more of what you earn that you won't have to pay NI on. NI is at 12% so £24 saving.

So you will be £136 better off each (assuming you both earn more than £10k and less than £42k).

Thank you! I was getting really confused that if it had gone up, why I wouldn't have £560 more.

So everyone on basic rate will be the same? I have some people who have said they're not getting any increase on the calculation and I don't see how that can be.

Another quick qu if poss, I started my first ever FT job last October, but I am paid hourly as its a graduate placement. I've not earnt enough yet to have to pay tax. As a tax year is april-April do I start again next month from £0? Or do I continue on and will cross the £9440 very soon?

Thanks!

bargainbetty

When the new tax year starts, the payroll software/calculators assume that your monthly income is one twelfth of your annual income, and therefore allows you a twelfth of your annual allowance.

You'll get taxed every month, but if you leave before your full allowance is used up and do not take on paid employment that goes over the threshold in the same financial year, you can apply for a refund at the end of the year.

Tixy

From the new tax year the £10000 will be split into 12 so £833 a month. Anything you earn over £833 in April you will pay tax on. And assuming you have a flat salary through the year it will be basically the same each month.

Yes everyone on basic rate should be the same (except people over 65).

Buzzybee90

Tixy wrote: »

From the new tax year the £10000 will be split into 12 so £833 a month. Anything you earn over £833 in April you will pay tax on. And assuming you have a flat salary through the year it will be basically the same each month.

Yes everyone on basic rate should be the same (except people over 65).

Ok thanks, but it will be 20% of the couple of hundred quid over that then? Thanks. Am I meant to have been paying it before? This is making more sense now..

Tixy

it will be 20% of the couple of hundred quid over that then

Yep

Am I meant to have been paying it before?

Probably not if you started earning part way through the year. You still get the full years allowance even though you only earned for some of the year.
So if by Feb 2014 you have earned less than £8653 in total for the year (being £9400 x 11 / 12) then you are below the current threshold for the year to date.

PS All this assumes you are on the standard tax code of 944L (which you probably are).

Buzzybee90

Tixy wrote: »

Yep



Probably not if you started earning part way through the year. You still get the full years allowance even though you only earned for some of the year.
So if by Feb 2014 you have earned less than £8653 in total for the year (being £9400 x 11 / 12) then you are below the current threshold for the year to date.

PS All this assumes you are on the standard tax code of 944L (which you probably are).

Yes I am, thank you!

FatVonD

Buzzybee90 wrote: »

I have some people who have said they're not getting any increase on the calculation and I don't see how that can be.

They only wouldn't get an increase if they were earning less than £9440 anyway.