High earners lose out in tax shake-up There were cheers on the government benches when the chancellor announced that the personal allowance would rise to £10,000 starting from April next year, fulfilling a key coalition government pledge a year early. However, many on higher earnings will not feel the benefit, as they will be paying more tax at the higher rate and possibly more national insurance too. Income taxes are the single most important contributor to the Treasury's coffers - receipts of £155bn are forecast in 2013/14 - so largesse at one end of the earnings spectrum must be offset by parsimony somewhere else if overall revenues are to be maintained. The savings needed to pay for the increased personal allowance are coming from freezing the age-related allowances, a measure announced in last year's Budget; reducing the personal allowance for those earning more than £100,000; and lowering the basic-rate limit. This has fallen from £37,400 in 2009/10 to £32,010 in 2013/14 and will drop to £31,865 in 2014/15. Tax advisers have estimated that such moves mean an additional 400,000 people will pay tax at 40 per cent on some of their earnings. That means someone earning £50,000 will pay around £9,627 in income taxes in 2014/15. The same individual would have paid £9,930 in 2009/10. There is some relief for those earning more than £150,000, in that the top rate of taxation falls from 50p to 45p from April 6, but the tapering of the personal allowance for those earning more than £100,000 remains. Those in final salary pension schemes may also see an increase in their national insurance contributions, because the NIC rebate for "contracting out" of the state second pension will end with the introduction of the flat-rate state pension in 2016 - a year earlier than planned. The value of the rebate is 1.4 per cent for employees, so its loss will mean £300-£400 more a year in NI for a worker on average earnings of £26,000 per year. Tom McPhail, head of pensions research at Hargreaves Lansdown, said he expected "another wave of closures" in private sector schemes in response to the loss of the contracting-out rebate and other pressures. Personal incomes and national insurance are only one area where reliefs and allowances have not kept pace with growth in prices or earnings. Inheritance tax threshold will remain frozen until at least 2018 to help pay for the proposed cap on social care costs. Adjustments to reliefs and allowances attract far less attention than changes to headline rates of taxation, but can be equally effective when it comes to raising revenue. As one senior tax adviser observed: "Fiscal drag has been the chancellor's best friend for as long as I can remember." Couple, two working, two children Annual pre-tax income Net income Net income 2013/14 Gain/loss Couple's aggregate working hours are at least 30 hours per week with one member of the couple aged above 16 and working a minimum of 16 hours per week. Children aged between 1 and 16, or under 19 and in full-time education. No childcare costs. Income split 50:50 Source: Deloitte Married retired pensioner aged over 75 At least one member of the couple was born before 6 April 1935 to qualify for married couple's allowance.If born after 6 April 1938, no entitlement to second age-related allowance. Pension credits excluded. Source: Deloitte