Tax allowances increase: When will tax allowances rise this year?

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Tax-free allowances work by reducing the level of taxation you have to pay on the income you receive. Tax allowances reduce the level of tax you pay, impacting your overall tax bill. There are various different tax allowances which are eligible for people in different circumstances.

Tax-free allowances reduce the amount of tax you have to pay on the income you receive.

Tax allowances work by permitting you to earn a certain amount before you begin paying tax.

The Government sets the level for this personal tax-free allowance this year.

Typically this amount rising each year in line with the start of the new tax year.

Currently, the tax-free allowance is set at £12,500 for the 2020/2021 tax year.

For the 2021/2022 tax year, the personal tax-free allowance will rise to £12,570.

This will be the limit unless your income level is more than £100,000.

Once your income exceeds £100,000, you lose £1 of your personal tax-free allowance for every £2 you earn.

There are several other types of tax allowance each related to your personal circumstances.

Married couples allowance is a tax benefit available to married couples and could see couples reduce their tax bill by between £351 and £907.50 a year.

For the 2020/2021 tax year, the allowance is £9,075 and it will rise to £9.125 for the following tax year.

The income limit for married couple’s allowance will rise, from £30,200 to £30,400.

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Blind Person’s Allowance is an additional tax-free allowance available to those who are registered as blind or severely sight impaired.

This is added to your existing personal tax-free allowance which means you can earn more before you begin paying Income Tax.

For the 2020/2021 tax year, the amount of Blind Person’s Allowance is £2,500.

In the next tax year, this amount will rise to £2,520.

A dividend allowance comes into force with the income you earn from dividends.

This tax-free allowance means you do not pay tax on a certain amount of dividend income you receive, no matter what other non-dividend income you have.

For the 2020/2021 tax year, you do not pay any tax on the first £2,000 you receive.

This allowance was cut from £5,000 in the 2017/2018 tax year.

The current dividend allowance will remain at the same rate for the 2021/2022 tax year.

When will tax allowances rise this year?

The end of the 2020/2021 tax year is fast approaching.

In Britain, tax years always last from April 6 to April 5 each year.

This means the new tax year and the new tax-free allowances will come into force on April 6, 2021.

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