United Kingdom

Better or worse off next year? 

Many tax changes for next year have already been announced (click here for what we already know and for rates and allowances http://www.hmrc.gov.uk/rates/taxes-ni.htm).  So how might the changes hit your pocket?  Based on the pre-announced rates for 2013/14 KPMG has analysed some common scenarios below to find out who will be better off and who will lose out.

retired couple

Frank (81) and Sally (76) are a married, retired couple. 

 

Frank has a state pension of £5,587 and an Occupational Pension of £10,000. Their investments consist of 100 shares in Santander with their main savings in cash ISAs. They like to go on two holidays each year to warmer parts of Europe. They have a Honda Jazz for quick trips to the shops and around the local area, averaging 2,000 miles per year. 

Net Income after
IT & NIC

Indirect Tax

Gain/(Loss)

2012/13 – base year   

18,796

 (901)

-

2013/14

19,012

 (924)

193

 

Frank and Sally are better off due to the increase in the state pension and the personal allowance. 

 

 married couple two kids

John and Sue are both in their late 30s and have two children. Sue is a middle manager earning £52,000 pa while John stays at home to look after the kids. They have a VW Golf and average 15,000 miles per year. John and Sue take the kids on one holiday abroad per year.

 

 

 

Net Income after
IT & NIC

Indirect Tax

Gain/(Loss)

2012/13 – base year   

38,606

 (1,098)

 

2013/14

38,526

 (1,113)

(95)

 

The married couple have benefitted from the increase in the personal allowance.  However, this benefit has been eroded by the abatement of the child tax credit, fuel duty and air passenger duty.

 

Graduate looking at mobile phone  

Steven has just finished university and is starting work as a trainee accountant in London on £30,000 pa.  He has taken out the full student loan available to him and is starting to make repayments.    Steven takes an average of three holidays per year, to Europe and visiting family in Aberdeen.

  

Net Income after
IT & NIC

Indirect Tax

Gain/(Loss)

2012/13 – base year   

21,655.15

(260)

 

2013/14

21,940.15

(268)

277

  

 Steven is better off due to the increase in the personal allowance and national insurance threshold.

 

 single parent, one child

Alex is a single parent in her late 20s.  She earns £15,000 pa working 30 hours a week and relies on paid childcare for her one child.  She has a 14-year- old Peugeot 106 and averages 12,000 miles per year.

 

 

 

 

Net Income after
IT & NIC

Indirect Tax

Gain/(Loss)

2012/13 – base year   

18,166

(1,128)

 

2013/14

18,501

(1,145)

318

 

 

Alex is better off due to the increase in the personal allowance and national insurance threshold..

 

 

business man 

Hugh is a senior executive at a multi-national firm.  He earns £200,000 pa and his wife is not in paid employment.  They have no children.  Hugh and his wife holiday in the Carribean and America. He has a company car (Mercedes E-Class) and a second car (BMW 5 Series) which his wife uses.  

 

 

Net Income after
IT & NIC

Indirect Tax

Gain/(Loss)

2012/13 – base year   

96,129

(1,817)

 

2013/14

99,977

(1,850)

3,815

  

Hugh is better off due to the decrease in the additional to 45% 

 

 

Assumptions

 

Frank and Sally

Frank has maximum state pension

Sally's state pension does not exceed her personal allowance

They have two holidays in Europe per year and fly business class

 

John and Sue

The married couple have one holiday in Europe per year and fly standard class

 

Steven

The graduate makes two trips to Europe each year and flies standard class

He makes one return trip per year to see his family and flies standard class

 

Hugh

Hugh's wife drives a BMW 5 Series and averages 10,000 miles per year

Hugh and his wife have two holidays per year, in America and the Caribbean, and fly upper class

 

All cars are petrol vehicles