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.

The content of this article is for general information only and does not constitute tax advice. It should not be relied upon and action which could affect your business should not be taken without appropriate professional advice.

Written by Ellie Hammett ACCA

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