Autumn Statement 2016 - What changes could we see to personal tax?

Published at 10:07 AM on 11 November 2016

Iain McCluskey, partner at PwC, said:

“A headline grabbing personal tax policy since 2010 has been the year on year above inflation rise in the tax free personal allowance, which now stands at £11,000, an increase of 70% since the 2010/11 tax year. The Government has taken a significant number of workers out of income tax as a result of this policy.

“However, continuing this policy will have a diminishing impact on the lowest earning employees such as apprentices and part time workers, who may already earn less than the new personal allowance.  Instead, the Chancellor would better benefit lower paid workers by increasing the Primary Threshold which is the point from which employees start to pay National Insurance.

“Employers and employees pay Class 1 NIC depending on how much the employee earns. The current Primary Threshold is £672.01 per month, much less than the tax free personal allowance. As such, there is a significant band of employees who are not paying income tax, but are still subject to Class 1 NIC. The Chancellor should consider freezing the tax free Personal Allowance, and instead focus on raising the Primary Threshold for employees until it aligns with the Personal Allowance.  This will truly benefit those employees who are the lowest paid in our country, saving them £29.36 per month.

“As a rise in the Primary Threshold would benefit all NIC payers, and would therefore be expensive, the Chancellor could look to restrict the rise in the Primary Threshold to just employee contributions, and only for those earning less than £100,000.”




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