ListenToTaxman.com

UK PAYE Tax Calculator / Salary Calculator

The number 1 free UK salary calculator tax calculator since 1998. Calculate salary, national insurance, HMRC tax and net pay

Summary of Budget Tax changes for 2013/14

Here we have information on the changes to income tax brackets, personal allowances, allowable deductions, etc for the 2013/14 year to come.

See our article on the new 2014/15 Budget Summary

Lets start with the good news!

Personal Allowances

Allowance2013/142012/13Change
Basic £9,440 £8,105 + £1,335
Aged 65-74 £10,500 £10,500 none
Aged 75+ £10.660 £10,660 none
Married Couples Allowance ( if born before 6th April 1935) £7,915 £7,705 + £210
Blind Person's Allowance £2,160 £2,100 + £60

The increase in the Basic Personal Allowance by £1,335 certainly is good news to those families at the bottom of the income ladder. According to The Treasury, this Personal Allowance increase will lift an additional quarter of a million people out of having to pay income tax altogether. Being able to earn up to £9,440 without paying any tax, brings the Coalition Government's goal of achieving a basic personal allowance of £10,000 for all by 2014/15, another step closer.

For the over 65's however, the news is not so good. Allowances for both the over 65's and 75's have been frozen. 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.

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 £118,880 now negates your personal allowance rather than £116,210 as it was this past tax year.

The Age Related Income Limit has increased by £700. For 2012/13 tax year it was £25,400. For 2013/14 the rate is £26,100. From April if you are over 65 years and your earnings are above £26,100, your Personal Allowance will be reduced by £1 for every £2 you earn over that £26,100 limit.

Tax Brackets

Tax Rate2013/142012/13Change
Basic rate 20% £0 -£32,010 £0 -£34,370 cut by £2,360
Higher Rate 40% £32,011 - £150,000 £34,371 -£150,000 increased by £2,360
 £150,001+ Additional Rate 50%  No longer in use
Additional Rate 45% £150,001+ not applicable 5% rate reduction
NOTE: These rates are applied after your tax free allowance has been deducted from your gross wage.

Here we have the not so good news! There has been no increase in the tax rates, in fact the top rate for those lucky enough to be earning over £150,000 has dropped by 5%. But the changes to the tax brackets themselves will mean that more taxpayers will be paying the higher rate of tax (40%) in 2013/14. The threshold crossing into the 40% bracket has dropped from £34,370 in 2012/13, to £32,010 for 2013/14. In fact The Treasury are expecting that the change to the tax brackets will create around 400,000 more higher rate taxpayers by the 2015/16 tax year.

The decrease in the threashold for the Higher Rate tax bracket has been slightly offset by the increase in the Basic Personal Allowance. If you take the new Basic Tax Rate threashold of £32,010 and add it it the new Basic Personal Allowance of £9,440, we see that for 2013/14 you can earn £41,450 before you cross in to 40% tax territory. Last year, 2012/13, this figure was £42,475.

Change in take home pay after tax and NI

Gross WageNet 2013/14Net 2012/13Difference
£10,000 £9,618 £9,332 +£286
£20,000 £16,418 £16,132 +£286
£30,000 £23,218 £22,932 +£286
£40,000 £30,018 £29,732 +£286
£50,000 £35,963 £35,777 +£186
£75,000 £50,463 £50,277 +£186
£100,000 £64,963 £64,777 +£186
£125,000 £75,687 £76,037 -£350
£150,000 £90,187 £90,537 -£350

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.

Description 2012/13 2013/14
Lower earnings limit, primary Class 1 £107 per week £109 per week
Upper earnings limit, primary Class 1 £817 per week £797 per week
Primary threshold £146 per week £149 per week
Secondary threshold £144 per week £148 per week
Upper accrual point £770 per week £770 per week

Other Notable Changes

Student Loan Repayment Threshold

Student Loan Repayment Threshold is increasing from £15,795 in 2012/13, to £16,365 in 2013/14.

Childcare Vouchers

The only change in 2013/14 to childcare vouchers is an increase in the tax free exemption for those in the additional (45%) tax bracket. For those in the 20% tax bracket the tax free exemption limit is still £55 a week; for those paying the higher rate, 40% tax bracket, the exemption  limit is £28 a week. For those in the additional 45% tax bracket there is an increase in the exemption amount from £22 to £25 a week (£97 to £110 a month).

From 2014/15 there will be radical changes to the voucher system. Those working parents with children under 5 years old will be entitled to claim £1,200 for each child. They will effectively not have to pay basic-rate tax on the first £6,000 they spend on child care. In the case of a couple, both parents must be working in order to claim vouchers to help subsidise the costs of child care. For single parent families, the single parent must be in employment.

From autumn 2015, parents already claiming vouchers can continue to receive this support or switch to the new system. New parents will not have the option of the older voucher scheme. For more on the chnges, see our article here.

Annual Pension Contribution Allowance

There will be a change in the tax-free amount you can put into your pension in 2013/14. Last year, 2012/13, it was £50,000 for the year. From April 2014 this figure will drop to £40,000.

Child Benefit

There will be no increase in 2013/14 to the rate at which Child Benefit is paid. The changes to Child Benefit have been brought about through taxing them through Self Assessment if your Net income is over £50,000. See more on these changes here. The Guardian's Allowance has increased by 35p to £15.90 a week. 

Tax Free Savings Allowance

From 6 April, the overall annual limit for Individual Savings Accounts (ISAs) will rise from the current level of £11,280 to £11,520. Half of this, £5,760 (2013/14) can be saved in a cash ISA. The rest, or the total amount, can go into a stocks and shares ISA. The Junior ISA limit will be increased from £3,600 to £3,720 in 2013/14. During the budget statement, 20th March 2013, the government have promised to look in to allowing the transfer of money from Child Trust Funds in to Junior Isa's, a development worth keeping an eye on.

This article was published in our News section on 21/03/2013.

Some Guides you may be interested in

  • A Contractor's introduction to Director's Loans There may be a time when you need to loan money to or borrow money from your own Limited Company. Director’s loans are wrapped up in fiddly bits of legislation. When borrowing cash from your company, care must be taken. You must ensure that you fully understand the tax implications before you take any kind of loan from your business.
  • What do you do if you receive a letter from the HMRC Let Property Campaign? So you've received a letter from HMRC’s Let Property Campaign? Happy New Year! From my experience, your initial reaction is likely to be one of the following......
  • A contractors guide to VAT Value Added Tax (VAT) is a standard consumption tax levied on almost all goods and services in the UK. If you’re a contractor, working through your own Limited Company, registering for VAT could significantly improve your tax efficiency.
  • Off-payroll working in the private sector - a contractors guide IR35 is a tax legislation used to distinguish between employees and genuinely self-employed contractors. Last month we compiled a comprehensive guide to IR35. Now, we take an in-depth look at how the ‘off-payroll working’ rules, introduced to the public sector in 2017, will be extended to medium and large-sized businesses in the private sector from April 2020.
  • Valid expenses you could claim as a landlord Are you a landlord? Maybe considering a new home, and letting out your current property? Maybe you’re working abroad for a while, and renting your home to make ends meet? Before you take the plunge (or even if you took it years ago), this article aims to help you make the most from your rental income.
  • A guide to expenses for Contractors As a contractor, working through your own limited company, one of the main benefits available to you is the ability to claim business expenses. Claiming expenses correctly can reduce your tax bill, it’s a vital part of running your company tax efficiently.
  • 7 reasons you could have the wrong Tax Code Your Tax Code tells your employer how much tax to take off your pay. What if your code is wrong? In the past 4 years, 1 in 3 employed taxpayers have been overcharged tax because their employer has received the wrong code from HMRC!
  • IR35 - A contractors guide for 2018/19 IR35 is a complex piece of legislation used to distinguish between true self-employed contractors and employees. As a contractor, it’s important that you have an awareness and understanding of IR35 to ensure that you’re paying the correct amount of tax and National Insurance. Here’s a definitive introduction to IR35 to help you understand how it works.
  • Making Tax Digital for Landlords There's every chance that you are not yet aware of Making Tax Digital (MTD). However, if you are a landlord with rental income - (that's income, not profit) – greater than £10,000 annually then you should be. MTD is the biggest shake up to the UK tax system since the advent of Self-Assessment in the 1990s. And it affects you, from April 2020 at least.
  • Contractors - LTD Company v Umbrella? What are the benefits for contractors of setting up a Limited Company vs Umbrella Company? Read our guide, see how much you could take home in each setup.

More from our News section