An increase in the income tax threshold means pretty much everyone earning over £12,500 is set for a mini pay rise next year. Philip Hammond said the personal allowance, the income at which workers begin to pay tax, would increase to £12,500 from April.
Announcing the move while unveiling the 2018 Budget, he added that high-earners will also no longer pay 40% tax until they earn more than £50,000.
They had been due to come into effect in April 2020. The new income tax threshold means those earning £12,500 will save £130 a year.
Speaking to Metro.co.uk, Hannah Maundrell, Editor in Chief of money.co.uk said: ‘Boosting personal allowance to £12,500 and the higher rate threshold to £50,000 a year early will mean many of us pocket a mini payrise next April. ‘Plans for tackling potholes, a new railcard for 26-30 year olds and a freeze on fuel duty and tax on craft beer, cider and spirits are all small wins for household finances.
‘Ultimately the outcome of Brexit negotiations will determine whether spreadsheet Phil needs to pull something bigger out of his little red case’. Also in today’s Budget reveal, Mr Hammond announced that Britain will introduce a new digital services tax aimed at tech giants from 2020, in a bid to raise £400 million in one year.
Chancellor Hammond said: ‘It is only right that these global giants with profitable businesses in the UK pay their fair share.’ Hammond said the tax would be introduced from April 2020 and would apply only to profitable businesses that generate at least £500 million a year in global revenues.
The tax is expected to raise £400 million a year, he said, adding that more details would be revealed later while stressing that it would not be a tax on online sales. The national living wage is also set to increase from £7.83 to £8.21 an hour for workers aged 25 and over next April, an above inflation rise of 4.9%.
The Chancellor said that the minimum wage for other age groups will also go up – from £7.38 to £7.70 for 21-24 year olds, from £5.90 to £6.15 for 18-20 year olds and from £4.20 to £4.35 for 16-17 year olds. The statutory rate for apprentices aged under 19 or in the first year of their apprenticeship will increase by 20p an hour to £3.90.
The Low Pay Commission (LPC), which recommends minimum wage rates, estimated that the increases will benefit around 2.4 million workers. In total, the annual earnings of a full-time minimum wage worker will have increased by over £2,750 since the introduction of the national living wage in April 2016, it was estimated.
Philip Hammond told MPs that the Government had an ultimate objection of ending low pay, while wanting to protect employment. The Government will set out next year the LPC’s remit for the years beyond 2020, saying it will hold consultations as it sets policy to take account of the potential impact on employment and economic growth.
Bryan Sanderson, chairman of the LPC, said: ‘The increase in the national living wage to £8.21 in April 2019 will ensure a pay rise for the lowest-paid workers that exceeds both inflation and average earnings. ‘Over the past year, the labour market has continued to perform well and the economy, while subdued, has met the criteria of ‘sustained growth’ set out in our remit for the national living wage.
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