Income Tax – for 2012/13 the personal allowances increase to £8,105 for those aged under 65, £10,500 for 65-74’s and £10,660 for those 75 and above. The age allowance limit is increased to £25,400, if income exceeds this the allowances are reduced by £1 for every £2 of income over this (but will not reduce further than £8,105). The next £34,370 will be subject to tax of 20%, 40% tax is payable on income between £42,476 and £150,000, above this the rate remains 50%. The respective rates for dividends are 10%, 32.5% & 42.5%. Where income exceeds £100,000 the personal allowance is reduced by £1 for every £2 of income over £100,000.
National Insurance – for the self-employed class 2’s increase to £2.65 per week, class 4 is due at 9% on profits between £7,605 and £42,475, and 2% above £42,475. For employees, 12% of earnings between £7,605 (£146 per week) and £42,475 (£817 per week), and 2% above £42,475. Employers NI is due at 13.8% where the employee earns above £7,488 (£144 per week).
Corporation Tax – from 1.4.12 the small companies rate remains at 20% (on first £300k of profit). The main rate (profits exceeding £1.5m) was due to drop to 25% but an additional 1% cut means it will be 24% (a marginal rate of tax is payable on profits between £300k & £1.5m).
VAT – from 1.4.12 the registration limit increases to £77,000 (up from £73,000).
Capital Allowances – as previously announced the Annual Investment Allowance reduces from £100,000 to £25,000. Writing Down Allowances reduce from 20% to 18% for the main rate and from 10% to 8% on the lower rate. A 100% first year allowance is still available for certain energy efficient plant & cars.
Capital Gains Tax – the annual allowance for individuals remains at £10,600. The CGT rate remains at 18% (or 28% if you are a higher rate taxpayer). The Entrepreneurs’ Relief rate of 10% still applies to the sale of businesses for the first £10 million of lifetime gains.
Inheritance Tax – the nil rate band of £325,000 (£650,000 for married couples and civil partners) remains the same.
Business Mileage – rates remain the same at 45p per mile for the first 10,000 business miles and 25p per mile in excess of 10,000 business miles.
ISA’s – for 2012/13 the annual limit is increased to £11,280 (cash element £5,640).
Future Proposals – for 2013/14 the personal allowance is set to increase to £9,205, at the same time though the 20% tax band will reduce to £32,245 meaning 40% tax will be due on income above £41,450. The 50% additional tax rate will reduce to 45%. The age related allowances will be removed, for those already receiving them they will remain at 2012/13 levels until such time the main personal allowance exceeds them. Child benefit legislation will introduce a charge on a taxpayer where their income is in excess of £50,000 in a tax year where they or their partner are in receipt of Child Benefit. The charge will apply at a rate of 1% of the Child Benefit award for each £100 of income between £50,000 and £60,000. Those on income above £60,000 will be subject to a charge equal to the amount of Child Benefit paid (claimants can opt not to receive Child Benefit rather than pay the charge). This comes into effect from 7 January 2013.
All of the above is only a summary of key information. Many other areas were also covered in the budget so please don’t hesitate to contact us should you wish to discuss these or any of the above.