Today, 20th March, in his fourth Budget statement, the UK Chancellor of the Exchequer pledged to increase the UK income tax threshold to £10,000 in April 2014. The current personal allowance before tax is levied is £8,105, which will rise to £9,440 in April 2013. It was only a few years ago, that the UK personal allowance was not even £5,000! These swift and generous increases in the UK personal allowance amounts are taking more and more earners out of tax and if it is not taking them out altogether, it is certainly making them better off. Let's look at this in action: Mary is an employee in a factory in Bristol. She works in a full time, stable employment and earns £20,000 per year.
- · In 2012/13, she would pay £2,379 in income tax - correctly deducted through the PAYE system
- · In 2013/14, she would pay £2,112 in income tax - correctly deducted through the PAYE system
- · In 2014/15, she would pay £2,000 in income tax - correctly deducted through the PAYE system
Now lets consider the position of someone who has not worked a complete tax year (remembering that they are still entitled to the full personal allowance to set against only a partial years earnings.) Peter is an employee in the same factory in Bristol. In October, after having worked six months/earned £10,000, he decides he hates his job and wants to go travelling!
- In 2012/13, his tax liability would be £379 - but he would have paid £1,189.50 through the PAYE system. £810.50 refund!
- In 2013/14, his tax liability would be £112 - but he would have paid £1,056.00 through the PAYE system. £944 refund!!
- In 2014/15, his tax liability would be £nil - but he would have paid £1,000.00 though the PAYE system. You do the maths!!!
I think we can welcome this particular Government measure as being one for the working man (or woman.) You should remember: you can apply for a tax refund as soon as you finish work and know that you won't be working again in that financial year. You should also remember that we have been advising on such matters for years, helping thousands of people get their hard earned money back from the over-worked and under-resourced UK tax authorities - in the vast majority of cases much more quickly and easily than if they tried to do it themselves.