Fiscal drag is subtly increasing the tax burden on many individuals due to the frozen Personal Allowance. This article explains the impact of this phenomenon and explores a method for married couples to mitigate it through the Marriage Allowance.
One of the key factors that determine how much money you retain each year, and how much is claimed by the taxman, is 'fiscal drag'. However, few people are aware of the impact this has on their finances due to the freeze in the Personal Allowance , or the measures they can take to mitigate it.
The Personal Allowance is the amount you can earn before you start paying tax, which currently stands at £12,570 and is set to remain at this level until at least 2028. This means that anything you earn above this threshold is taxed at 20 percent and deducted directly from your pay in regular PAYE jobs, rising to 40 percent for every £1 over £50,270 and 45 percent for additional rate taxpayers on income over £125,000.
Married couples or those in a civil partnership can boost their tax-free take-home pay by £252 in a single financial year, and also backdate their claim for four additional years to receive a tax rebate of up to £1,242. When combined with their Personal Allowance for the year, this amounts to £14,064 tax-free, reports the Express.
FISCAL DRAG PERSONAL ALLOWANCE TAXATION MARRIAGE ALLOWANCE INCOME TAX
United Kingdom Latest News, United Kingdom Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Fiscal Drag: How the Frozen Personal Allowance Affects Your FinancesThis article explores the impact of fiscal drag on individuals' finances due to the frozen personal allowance. It explains how the freeze, combined with rising wages, pushes more people into higher tax brackets. The article also highlights the Marriage Allowance scheme, which allows couples with income disparities to transfer a portion of their personal allowance, reducing their overall tax burden.
Read more »
How To Increase Your Tax-Free Allowance: Marriage Allowance ExplainedDiscover how the Marriage Allowance can help you save on taxes if you're married or in a civil partnership with a significant income disparity. Learn about the Personal Allowance freeze and how it affects your finances.
Read more »
Attendance Allowance simplified to help older people make a new claimMore than 1.6 million people over State Pension age are receiving either £72.65 or £108.55 each week in Attendance Allowance.
Read more »
New DWP pay rates for people on PIP, DLA and Attendance Allowance from AprilFull list of new payment rates for disability benefits and Carer's Allowance.
Read more »
Attendance Allowance rules older people must know or £434 payments could stopOver 1.6 million State Pensioners receive either £72.65 or £108.55 each week on Attendance Allowance.
Read more »
Arthritis Claims Soar, Thousands Eligible for Attendance AllowanceThe number of people receiving Attendance Allowance for arthritis has reached nearly 470,000 in Great Britain, highlighting the prevalence of this condition among older adults. The benefit, which provides financial support for those with physical or mental disabilities, is not affected by savings or income. Many more individuals may be eligible for Attendance Allowance but remain unaware of its availability.
Read more »