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Budget 2013: earn £10,000 tax free by 2014
by Sarah Miloudi on Mar 20, 2013 at 13:28
George Osborne has confirmed a tax-free personal income allowance of £10,000 will be introduced, after promising earlier in the day to help Britain's hard workers.
The change will come into force next year and at the same time around two million people will be taken out of the tax system altogether.
The move towards the £10,000 allowance had initially been planned for the end of the parliament, however Osborne said it will increase to £9,440 in two weeks, and by 2014 the allowance will climb to £10,000.
Positioning the coalition as a champion for Britain's workforce, the chancellor confirmed the measure in his third Budget, saying he would take tax 'away from jobs'.
According to data from Capital Economics, the allowance will cost the Treasury in the region of £1.4 billion. But as part of Osborne's ambition to tackle the root of UK's economic woes and support those in work, the chancellor decided not to disappoint expectations and unveiled the tax break, offering a major boost to lower and mid-range earners.
In 2011/12, the tax free allowance was £7,475 and for the year 2012/13 it was set at £8,105.
Although the move is positive for lower earners, Dominic O'Connell, head of tax, trust and estate planning at Coutts, warned it could trigger larger tax bills for higher earners.
'While this will be welcome to many, for those earning over £100,000 it has the potentially negative effect of increasing the amount of income that will be taxed at 60% from £18,880 to £20,000 in 2014/15,' he said.
Elsewhere, Osborne said the recovery had taken longer than many had hoped, but it was important to remain on the 'right track' and support jobs, domestic manufacturing and education, while stamping out tax avoidance and making levies more attractive in order to lure business to Britain.
Growth in the eurozone has been revised down and is likely to remain in recession territory for much of the year, and Osborne said that another bout of instability in the single currency block would hit the UK.
By unveiling an 'aspirational Budget', Osborne said those aiming to defy these conditions and secure their first job, buy a house and 'get on', had to be supported rather than hindered.
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