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2014 / 2015 Tax Rates and Thresholds are now live

The changes from April 5th are now live on the calculator. If you select the 2014/2015 value from the UK Tax Year field, you should be good to go.
17/03/2014
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The tax rates, thresholds and allowances for the 2014-2015 UK PAYE Tax Year (commencing April 5th) are now integrated into the calculator. I will post the exact rates and allowances on this page when I get some more time. As usual, any bugs or errors identified by you; I would appreciate an email so that I can make any necessary corrections. Happy calculating!  There were no surprise changes to 2014/15 tax rates or bands from yesterdays budget. The increase of the Personal Tax Free Allowance to £10,000 from April was previously announced and well publicised by George Osbourne. The news that this allowance would further increase to £10,500, in April 2015, was a very welcome surprise. As were the changes to ISA's and pensions. But first lets look at how the new budget will affect your wage packet from next month.

Personal Allowances

Allowance2014/152013/14Change
Basic £10,000 £9,440 + £560
People born between 6th April 1938 - 5th April 1948 £10.500 £10.500 none
People born before 6th April 1938 £10.660 £10,660 none
Married Couples Allowance ( if born before 6th April 1935) £8,165 £7,915 + £250
Blind Person's Allowance £2,230 £2,160 + £70

The increase in the Basic Personal Allowance by £560 to £10,000 a year will certainly be appreciated by lower income families. There has been a certain amount of confusion over this subject since an allowance increase was announced on budget day. It was announced that the personal allowance would increase to £10,500 for the 2015/16 tax year. Many seem to have taken this increase to refer to the coming 2014/15 tax year. This confusion has not been helped by much of the news coverage focusing on the planned increase to £10,500, but not the fact that it does not come into effect until 2015. 

There was no movement in the personal allowances for the over 65's however. Allowances for both the over 65's and 75's were frozen last year. This is part of the Government's plans to see one Personal Allowance for all. So there will be no movement in allowances for the over 65's and 75's until the Basic Personal Allowance has caught up to them, which should be next year.

Since 2010, anyone (irrelevant of age) who earns over £100,000 has had their Basic Personal Allowance reduced by £1 for every £2 they earn above £100,000. There has been no change to the earning limit of £100,00 when the reductions kick in. Of course the increase to the Basic Allowance will mean that reaching earnings of £120,000 now negates your personal allowance rather than £118,880 as it was this past tax year.

The Age Related Income Limit has increased by £900. For 2013/14 the rate was £26,100. The 2014/15 rate is £27,000. From April if you are over 65 years and your earnings are above £27,000, your Personal Allowance will be reduced by £1 for every £2 you earn over that £27,000 limit.

 Tax Brackets

Tax Rate2014/152013/14Change
Basic rate 20% £0 -£31,865 £0 -£32,010 cut by £145
Higher Rate 40% £31,865 - £150,000 £32,011 - £150,000 widened by £145
Additional Rate 45% £150,001+ £150,001+ no change
NOTE: These rates are applied after your tax free allowance has been deducted from your gross wage.

There has been no increase or change in the tax rates. But changes to the tax brackets themselves will mean that more taxpayers will be paying the higher rate of tax (40%) in 2014/15. The 40% tax bracket has widened by another £145, a much smaller increase than last years £2,360, but enough to push more 20% tax payers into the 40% bracket.

The decrease in the threashold for the Higher Rate tax bracket has been offset by the increase in the Basic Personal Allowance. If you take the new Basic Tax Rate threshold of £31,865 and add it it the new Basic Personal Allowance of £10,000, we see that for 2014/15 you can earn £41,865 before you cross in to 40% tax territory. Last year, 2013/14, this figure was £41,450 and for 2012/13 it was £42,475. So you can earn £415 more this year, before crossing into the 40% bracket, than you could have last year. This is something Geaore Osbourne has been bragging about. But the fact is that two years ago in 2012/13, you could have earned £610 more than you can this coming 2014/15 tax year before crossing into the 40% bracket. So those earning around the edge of the 20%/40% bracket for the last few years have been on a bit of a taxation see-saw. Anyone in this category, ie. hovering around the start of the 40% bracket, should be looking at salary sacrifices, childcare vouchers, pensions, etc as ways to keep themselves out of the 40% bracket. 

Change in take home pay after tax and NI

Gross WageNet 2014/15Net 2013/14Difference
£10,000 £9.754 £9,618 +£136
£20,000 £16,555 £16,418 +£137
£30,000 £23,355 £23,218 +£137
£40,000 £30,154 £30,018 +£137
£50,000 £36,142 £35,963 +£178
£75,000 £50,642 £50,463 +£178
£100,000 £65,142 £64,963 +£178
£125,000 £75,642 £75,687 -£45
£150,000 £90,142 £90,187 -£45

Source listentotaxman.com

National Insurance

There have been no changes to the percentage of National Insurance Class 1 contributions, they remain at 12% for employees, and 2% above the upper earnings limit. Employers Class 1 have remained the same at 13.8%. The limits and thresholds have changed, as illustrated in the table below. See HMRC for a more detailed view of NIC changes to other Classes.

Description2013/142014/15
Lower earnings limit, primary Class 1 £109 per week £111 per week
Upper earnings limit, primary Class 1 £797 per week £805 per week
Primary threshold £149 per week £153 per week
Secondary threshold £148 per week £153 per week
Upper accrual point £770 per week £770 per week

Other Notable Changes/Surprises

ISA's are now nicer or should I say NISA's

The unexpected announcement of the changes to cash ISA's, and the introduction of what the Government are calling Nica's, has been widely welcomed. ISA's have been floundering due to the low interest rates and general apathy towards them in the last few years. This shake up may go a long way to re-invigorate the whole tax-free savings market.  The main differences are

  1. The new cash ISA (NISA) yearly saving limit is to be increased from July 2014 to £15,000. The present cash ISA limit is £5,760, so this is a huge increase.
  2. Junior ISA limits are to be increased from £3,720 to £4,000 a year.
  3. There will no longer be a distinction between allowances for cash or share ISA's. At the moment you can save £11,520 in tax free savings per year, but a maximum of £5,760 of this can be in a cash ISA, the rest has to be in a share investment ISA, or else the whole £11,520 can be in a share ISA. Now the annual allowance will increase to £15,000 and you can put all into cash or share ISA's or mix and match as you want.
  4. You will now be able to move existing share ISA investments into cash ISA's.

Pension shake up

The requirement to purchase an annuity once retired has been removed. Pensioners will now have the choice to draw down a lump sum from their pension pot on retiring and spend it or invest it as they see fit. They will no longer be obliged to either purchase an annuity or pay a hefty penalty. Their lump sum will be their own to manage. This huge change will give pensioners greater freedom and flexibility with their own funds. This kind of free access to their pension pot has been denied to pensioners up to now.

Those facing retirement will also have access to a free advise service to help decide what is the best way to access their pensions.

Mr. Osbourne also announced plans for special saving bonds for the over 65's to start in January of next year. With promised interest rates of approx 2.8% for a one year bond and 4% for three year bonds, returns would seem to be much greater than those available from the high street banks.

Childcare

Working parents paying 80% of childcare costs of up to £10,000 per child, aged up to 12, to a registered provider will get the remaining 20% from the government tax-free from September 2015. This means up to £2,000 per child per year. This figure is higher than when the scheme was announced last year. At that point it was to be up to £1,200 per child. So this is a significant increase in the planned relief towards childcare costs.

Both parents must be working, earning up to £300,000 to qualify. For single-parents the earning limit is £150,000.

The Tax-Free Childcare scheme, available from Autumn 2015, will replace the existing Childcare Voucher Scheme. To be part of the scheme, parents will need to apply when it starts in 2015.

Annual Pension Contribution Allowance

From April 2014 the annual pension contribution allowance will drop from £50,000 to £40,000.