However, the personal allowance for those over 65 remained the same although there was in increase for those over 75.
The personal allowance for individuals was set at the following levels:
Age under 65: £7,475 (increased from £6,475 from the previous tax year) – although this was limited for those earning over £100,000 a year – see previous post
Age 65 to 74: £9,490 (the same level as the previous year)
Age 75 and over: £10,090 (increased from £9,640 the previous year)
Above these personal allowances there are different tax brackets for higher levels of earnings. There is a small 10% tax bracket which only applies to savings but essentially if your earnings from non-savings income are higher than that limit this 10% band does not apply.
So the 10% savings tax band is for the next £2,560 worth of income, but as stated this is ignored for non-savings income.
The first rate of tax for earnings is then 20% and this level applies to earnings of up to £35,000 over the personal allowance. The 20% tax band is being decreased so that more people will likely fall into the higher rate tax band above this.
The 40% tax band above this applies to earnings over the £35,000 but below £150,000. Don’t forget that you need to add your tax free allowance on to the £35,000 so essentially you will only fall into the 40% tax bracket if your earnings are above £42,475*
A new tax band of 50% was introduced a few years ago which applies to earnings over £150,000. If your earnings are above this level then you will not get any personal allowance so you will pay tax on anything over this amount.
*obviously all of these figures are generalised and depend on your own specific situation. This site is not intended to give financial advice but only to report on facts and figures as they stand.