national insurance

Budget 2016

Tomorrow, the Chancellor of the Exchequer will deliver his annual budget to the Houses of Parliament. We have already heard about some possible announcements (such as the introduction of a scheme to help people increase their savings), and we have been told that there will be no changes to pension tax relief (which looked likely, for a while).

From 6th April, the new tax year means changes to tax-free personal allowances, tax thresholds and the like. The Salary Calculator has been updated with the latest values so you can see what your payslip will look like from April onwards. The personal allowance has been increased to £11,000 per year, which will reduce the tax due for most people. There are changes to National Insurance this year, too – since it is no longer possible for a pension to be “contracted-out” (earning a reduction in NI contributions), those of you who had one of these pensions will be paying the full NI contributions from 6th April.

If you would like to see how these changes will affect you, head over to The Salary Calculator to see what difference it will make to your payslip!

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None of the content on this website, including blog posts, comments, or responses to user comments, is offered as financial advice. Figures used are for illustrative purposes only.

2016 Tax rates available!

The Salary Calculator has been updated with the latest tax rates, which take effect from 6th April 2016 – so you can now see how the changes will affect you. Just head over to The Salary Calculator – 2016 take home pay calculator, enter your details and remember to choose the “2016/17” tax year in the drop-down box.

The tax-free personal allowance has been increased by £400, which will reduce the amount of tax most people pay. However, from April 2016 those who have been paying into a pension scheme which is “contracted out” of the additional state pension will find that their National Insurance contributions go up. This is because from April it will no longer be possible to contract out of the pension, so the National Insurance reduction that this gave you no longer applies.

You can try out the 2015 and 2016 take home comparison calculator and see side-by-side how your payslip is likely to change in the new tax year.

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General Election Salary Calculator

As you may have noticed, there’s a General Election next month and the parties are all out campaigning. Since a major campaign point this time is personal taxation, I thought it would be interesting to compare how the main parties’ policies would affect take-home pay. You can try out the Election Salary Calculator here. This is a simplified version of the normal Salary Calculator, but if you enter your salary and a few other optional extras, it will estimate the differences in deductions for the 5 main national parties.

This is just an estimate, and not all of the details are available yet – I will update the calculator with more information as the parties provide it. I hope you find it interesting! Details of the changes are described below the results table. The BBC has a very good article explaining the parties’ positions on taxation and other policy areas.

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Budget 2015

The Chancellor gave his pre-election budget earlier today – announcing his plans for forthcoming years. With an election just around the corner, this budget is even more of a sales pitch than usual – most of the changes he announced would only come to pass if the Conservatives were to be in government for the next term.

From a personal taxation point of view, the most significant announcement was arguably the plan for the first £1,000 of interest earned on savings to be tax free, effective April 2016. This will allow almost everyone to pay no taxes on their savings interest (those with high incomes from elsewhere will have this £1,000 limit reduced, possibly to zero), but the amount saved each year for most people is likely to be only a few pounds – and at most £200. There is also a plan to raise the threshold for the higher rate tax (the point at which income tax increases from 20% to 40%) ahead of inflation – an effective tax break for those on good middle-class incomes.

The Salary Calculator has already been updated with the tax rates which take effect from April 2015 so you can see how your pay packet will change next month. You can also compare 2014 and 2015 tax rates side-by-side to see where the differences come in.

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April 2015 tax rates applied

From 6th April 2015, new tax thresholds and personal allowances will apply, and The Salary Calculator has been updated with these new values.

Although the default results are still for the current tax year, when you enter your details into the take home pay calculator, you will see a summary line at the bottom of the results showing how things will change from 6th April. Click on this line and you can see a side-by-side comparison of the 2014/15 and 2015/16 tax years, and a breakdown of how it will affect your take home pay. You can also choose 2015/16 in the tax year drop-down in the normal take home calculator.

The main change this year is an increase in the default personal allowance from £10,000 to £10,600 – which means you can earn an extra £600 without paying any income tax. The default tax code will change from 1000L to 1060L (if your tax code is different, it will probably change for next year to reflect the larger personal allowance). The Student Loan repayment threshold has also increased from £16,910 to £17,335, potentially saving those who are repaying their loans £38.25 per month (although this will also mean it takes longer to repay your loan).

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