Budget 2014: Personal tax changesChancellor increases personal tax allowance

19 March 2014

George Osborne

In today's Budget, Chancellor George Osborne announced that the personal allowance – the amount we earn before paying tax – will go up to £10,500 in 2015. 

Meanwhile, higher-rate tax at 40% will now start on income over £41,865.

Watch our response to Budget 2014 in the Which? Money Podcast video special


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Changes to personal taxation

It was already known that the personal allowance would rise from £9,440 to £10,000 for the next tax year, starting on April 6. This change means that the typical basic rate taxpayer will pay £705 less income tax per year in cash terms than they would have paid in 2010/11.

In 2014/15, the basic rate of income tax will remain at 20% on the next £31,865 of income.

Mr Osborne further announced that the amount you can earn before tax will rise again to £10,500 in 2015.

As expected, the earnings level at which higher-rate tax at 40% will now begin is £41,865 - this is due to continue going up by 1% a year in 2015/16, to £42,285. 

Go further: UK taxes compared - a history of tax rates

Other taxation announcements

Aside from the significant changes to savings taxation, there were announcements on alcohol and tobacco duties, with a penny coming off a the cost of a pint, but tobacco prices up by 2% plus inflation.

There was also a reform to Air Passenger Duty.

From April next year, all flights over 4,000 miles long will be taxed the same as flights between 2,001 and 4,000 miles, meaning that passengers flying to destinations including the Caribbean, China, India, Mexico, Kenya, South Africa, Australia and New Zealand will have a cut in tax.

Go further: Tax in retirement - what can pensioners expect to pay?

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