If last week’s Budget left you wondering how exactly you’ll be affected, you’re not alone. With the focus on freezing tax thresholds, it’s not easy to see the immediate impact the announcements will have on your personal finances.
According to Ian Haynes, Tax Director for Haines Watts Scotland, many people are trying to figure out what effect the changes are going to have on them:
“They are asking questions like: how will these changes have a direct impact on my pocket? What money will I have leftover? How much tax am I actually going to pay?”
And yet, with so many personal tax thresholds staying the same, there’s a sense of confusion about what the new reality means.
Nicola Goldsmith, Head of Private Client at Haines Watts explains that, rather than seeing an instant rise in their taxes, many people will eventually find themselves paying tax where they wouldn’t have done before.
This is because of what’s known as “fiscal drag” – where thresholds remain the same rather than being increased with inflation, therefore dragging more people into the tax band.