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Increase in low earnings threshold for 2014/15 is great news for families

The Chancellor’s budget was well received especially by families on minimal pay as there was an increase in the low earnings threshold for 2014/15. From April, the Personal Tax Free Allowance has been upped to £10,000. That was announced a while back by Chancellor George Osborne and it’s been well published by the government, but there was an additional increase announced for 2015.

The budget

The budget also contained news of a further increase to the low earnings threshold for 2014/15. In April 2015, the threshold will be increased to £10,500. The threshold changes depending on your age but it’s never lower than the figures mentioned here. People born between 6th April 1938 and 5th April 1948 have a threshold of £10,500 already. Those born before 6th April 1938 have a £10,660 threshold. These thresholds haven’t changes as a result of the most recent budget as allowances for those over 65-years-old and those over 75 were frozen last year.

High earners

Since 2010, high earners who take home £100,000 a year have had their Basic Personal Allowance reduced by £1 for every £2 they earn over £100,000. There haven't been any changes there but those earning big money will actually benefit from the announced changes as the increase to the Basic Allowance now means that you’ll need to reach £120,000 to negate the personal allowance rather than £118,880 as it was during the last tax year.

Tax brackets

The new numbers also mean that you can earn a higher wage before you find yourself paying 40% tax. For 2014/2015, you’ll need to earn more than £41,865 to pay 40% tax. Last year, the threshold was a little lower at £41,450.

Final word

The changes to the low earnings threshold for tax year 2014/15 are very positive for most people but they benefit low income earners the most. Working parents will also find a little extra comfort from the announced changes, as up to £2,000 of a kid’s childcare costs will be covered by the government from September 2015.

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