It was with much delight that Chancellor Osborne announced he would be raising the tax-free personal allowance for those born after 5 April 1948 to £10,000 from 6 April 2014. Increasing the allowance to this level was a key aim of the Coalition on taking office and the Chancellor was under pressure to deliver on this measure in this Budget.
The higher allowance will not be increased for those born before 6 April 1948 and this enhanced allowance will be removed in the longer term.
Then came the not so good news for middle-income earners, which partially explains how the £10,000 allowance will be ‘paid for’…..the basic rate limit (after the personal allowance has been accounted for and above which people start to pay tax at 40%) will reduce to £32,010 from 6 April 2013 and then fall again to 31,865 from 6 April 2014.
It had been announced previously that the additional rate of tax on incomes above £150,000 would fall from 50% to 45% which is seen as a boost to the UK’s higher earners and entrepreneurs.