Personal Allowance 2013/14

Tuesday, March 27th, 2012

The Income Tax (Indexation) Order 2011 in the Finance Bill 2012 already provides for the Personal Allowances to increase from the start of tax year 2012/13, at which point L suffix codes increase by 63 points and the Emergency tax code becomes 810L. This was confirmed in the Autumn Statement of 2011 and is not new information.

Part of the agreement between the Coalition parties was the intention to increase the Personal Allowance to £10,000 over the course of the current Parliament (to 2015). This has been well publicised and the subject of much discussion in recent weeks. In the Autumn Statement 2011, HM Treasury advised that they were not in a position to make a commitment to progress this increase and The Office for Budget Responsibility (OBR) projected the increase to £9,215 in 2016/17.

However, in line with the Coalition’s intention, the lower Personal Allowance will increase by £1,100 at the start of 2013/14 tax year to £9,205. L suffix tax codes will rise by 110 points, benefiting.

Comment

This will mean a tax reduction for the majority of lower and middle-income earners, lifting many out of the PAYE tax liability altogether. In real terms, i.e. after the effects of inflation, people will be benefit by £170.00 per year.

If the DWP maintains the alignment of the Personal Allowance with the Earnings Trigger for auto-enrolment, this could also see the same number of people lifted out of pensions liability as well as they cease to be classed as eligible jobholders. This does seem to defeat one of the objectives of auto-enrolment, which is to get as many people as possibly saving for their retirement particularly the lower-paid. I am sure that this is not the Government’s intention; therefore, maybe we will see the alignment discontinued next year.


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