Personal Allowances, Rate Thresholds & The National Minimum Wage

From April 2018 the tax free personal allowance will rise with inflation to £11,850, from the current level of £11,500, saving the average tax payer £70 or £140 for a higher rate tax payer.

This new increase in the personal allowance means that since 2011, the amount you can earn tax-free has risen by £5,375, saving the average worker £1,075 in tax.

In addition to raising the personal allowance, the higher rate – the point at which you start paying 40% tax – will be raised from £45,000 to £46,350. For somebody earning £50,000 a year, this will give them an extra £270 a year (on top of the extra £140).

From April 2018, the national living wage for those over 25 will increase from £7.50 to £7.83, with over 2 million workers expected to benefit. For a full time worker, this is expected to net an average increase in pay of £600 per year.

Increases in the National Minimum Wage will also apply to the following age brackets:

21 - 24

18 - 20

16 - 17


£7.38 per hour

£5.90 per hour

£4.20 per hour

£3.70 per hour

Failure to apply the new minimum wage to your employees can be met with a hefty fine, therefore please ensure that your payroll records are updated next April.

Written by Ellie Hammett ACCA

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