Autumn Budget 2018: Income tax cut for 32 million workers of up to £860 a year

Published by Stephen Little on 29 October 2018.
Last updated on 29 October 2018

Money and HMRC forms

Workers will see their pay packets increase after chancellor Philip Hammond announced he was bringing forward tax cuts a year earlier than planned in today’s Budget.

The basic tax-free personal allowance will rise to £12,500 and the higher rate to £50,000 in April next year.

Autumn Budget 2018: What Chancellor Philip Hammond announced, and what it means for your money

The change means that taxpayers will be able to earn £12,500 before they have to start paying any income tax at all.

Mr Hammond says: “My idea of ending austerity does not involve increasing people’s tax bills. I didn’t come into politics to put taxes up.”

The Conservative Party had originally pledged to implement the increase by 2020, but the Chancellor shifted this forward by one year.

The change will mean an annual tax saving of £130 for basic rate taxpayers, £860 for higher rate taxpayers and £600 for additional rate taxpayers in England and Wales.

Mr Hammond says that the changes will give 32 million people a tax cut. A single parent on universal credit and working 25 hours a week on the national living wage will benefit by an additional £890 next year.

Autumn Budget 2018: Lifetime Allowance to rise; Isa allowance to remain at £20,000

The current tax-free personal tax allowance is £11,850 for the basic rate, then above this the income tax rate is 20% until your income hits £46,350.

All money is then taxed at 40% until it reaches £150,000, whereupon you are then taxed at 45%.

Les Cameron, tax expert at Prudential, says: “The bringing forward of the £12,500 personal allowance and £50,000 higher rate threshold will be welcome to those on lower incomes but we mustn’t forget that increasing personal allowances are bad news for higher earners."

He adds: “Those with incomes over £100,000 will see an effective tax rate of 60% on £25,000 of their incomes.”

However, Deloitte warns that at £2.79 billion for the 2019/20 tax year it will prove a costly move for the chancellor.

Iain McCluskey, personal tax partner at PwC, says the chancellor’s scattering of a “fistful of cheap, light and airy” personal tax measures was more "tinkering than transformational".

Autumn Budget 2018: Pension tax relief receives stay of execution

He says: “This long standing policy, a brainchild of the coalition government, has proven more resilient than its original political architects. With wage inflation of 2.7%, it should mean that those with average or better wage growth see the tax bands move with them.”

He adds: “However, the lowest paid taxpayers who earn less than the current personal allowance won’t see any benefit from this rise in these thresholds, and will reflect on whether a rise in the much lower National Insurance Contributions lower earnings limit would have been a better spending choice.”

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Pity that nothing has been

Pity that nothing has been done with the long-standing Tory promises of reducing Inheritance Tax by raising the bar to £1 million; as well as inflated Stamp Duty which is making a major contribution to stagnation in the housing market because it’s cheaper to stay put and convert/develop properties rather than move - a profoundly misdirected legacy by a grossly incompetent previous Chancellor.

Nothing still about reducing

Nothing still about reducing the cost of personal care for those who must pay for themselves. the present threshold of £23,250 is way too low. the huge burden on those who pay despite making their lifetime contributions of taxes and National Insurance is unfair