New Chancellor Rishi Sunak will deliver his first budget on Wednesday 11th March but there are some things that we know will happen even before he does.
The Government have already promised there will be no rise in the rates of Income Tax, VAT or National Insurance before 2025 meaning rates will stay as they are.
You can find the current rates here: www.gov.uk/government/publications/rates-and-allowances-income-tax
This is obviously a good thing for tax-payers. However
Personal allowances will also remain as they are.
Over the last few years the government has consistently raised personal allowances. This is the amount we can earn before we have to start paying income tax. In 2014/2015 we could only earn £10,500 per year before paying tax. For 2019/2020 we could earn an additional £2,000 before being taxed.
The rate for the tax tear 2018/2019 was £11,850 and this was raised to £12,500 for the current tax year (2019/2020). This meant we paid tax on £650 less of our income, saving us £130 for the year and as a result we took home just over £10 more every month. The effect of a raise in the Personal allowance is a little bit more money in our net (or take home) pay.
The news that there will be no rise of the Personal allowance this year means, sadly, we won’t be getting that little bit extra due to a saving of our personal tax.
However, another promise the government made was to raise the National Insurance threshold for employees for the 2020/2021 tax year, from £8,632 to £9,500.
The threshold is the point at which we start paying National Insurance at a current rate of 12% for the employed and 9% for the self employed.
With the difference between the new rate and existing rate being £868 it means any employee earning over £9,500 will pay £104 less in National Insurance for the 2020/2021 tax year. This means you will have an extra £104 in your take home pay for the year. For the self employed the annual saving will be £78
National Minimum Wage
We also already know that the national minimum wage rate will rise from April 2020. For those aged 25 and over this will mean an hourly rate increase of 51p from £8.21 to £8.72 which equates to a 6.2% rise. You can find the other rates here www.gov.uk/national-minimum-wage-rates
Help and support
Get in touch with me if you have any concerns about how the budget will affect you.