The financial year runs from April to April and in 2015 the government are implementing some changes that will affect most taxpayers.
The theory is to reward work by supporting those with middle and lower incomes. Most teachers fall into the former category, so we thought it was important for you to have an overview of the main changes.
Changes that Affect Most Taxpayers
- Personal Allowance is being raised from £10,000 to £10,600. If you were born after 5th April 1948 you can earn £10,600 before you need to pay any tax at all – that’s £600 more than last year. If you are over 75-years-old your allowance is £10,660.
- Once you have used up your Personal Allowance, the point up to which you pay the basic rate of tax has been reduced from £31,865 to £31,785.
- The standard tax code for 2015-16 is 1060L.
- You will need to earn £42,385 before you need to pay the higher rate of tax at 40%. This was £41,865 last tax year.
- Income tax bands are slightly different.
20% Basic rate payable on taxable income £0-£31,785
40% Higher rate payable on taxable income £31,786-£150,000
45% Additional rate payable on taxable income over £150,000.
So, to work out how much income tax you will pay, you need to deduct your Personal Allowance from your salary amount
£35,000 (income) - £10,600 (Personal Allowance) = £24,400.
So you will pay the basic rate of tax of 20% on that £24,400.
Changes that will Affect Some Taxpayers
- New starting rate for taxing savings income is 0%! This is a massive difference as it was 10%. It applies to savings that total £5,000 and means that tax-free interest can be paid directly to your account.
- Junior ISAs and Child Trust Funds have annual subscription limits increased to £4,080.
- Cash ISAs and Stock and Shares ISAs have been harmonised at £15,240 across both. It is now easier to transfer money between these two types of accounts.
- Predictions are that there will soon be even more types of investments allowed in ISAs.
There are thousands of British teachers who are essentially overpaying their tax because they do not reclaim tax relief on their work-related costs. This isn’t just for the new tax year, with the tax office allowing you to reclaim for up to the last four tax years.
The most common reasons for teachers being eligible for tax relief are;
- Buying and washing specialist clothing – an example is P.E. kit
- Mileage on journeys you make between work places in your own car. Going to CPD conferences, meetings, visiting other schools in your cluster…the list is quite long when you think about it!
- Use of home for work. Yes, you all do it and the rules are complicated, but you could have some legitimate claims here.
- Subscriptions to professional bodies and Union fees e.g. the NUT.
Not everyone will benefit from the new 2015 changes and remember, HM Revenue & Customs (HMRC) put the onus on you to make sure your tax affairs are right. So it’s always best to check your own position each year
Click here for more information on Teacher Tax Rebates.