Right from the word go, personal tax took centre stage on Budget day thanks to the intense lobbying and debate around the personal allowance for income tax and the 50% top rate of income tax.
The Chancellor did not disappoint, announcing what he called the “largest increase ever” in the personal tax threshold to £9,105 for 2013-14 and plans to bring the top rate down to 45% from April 2013.
Here are the key announcements and rates set outlined on HMRC’s Budget 2012individual tax page:
The income tax allowance for those aged under 65 will be £8,105 in 2012-13, as previously announced, with a corresponding decrease in the basic rate limit to £34,370.
The higher rate threshold will remain unchanged in 2012-13 at £42,475.
For 2013-14 the personal allowance for those aged under 65 will be set at £9,205 and the basic rate limit at £32,245. The Class 1 Upper Earnings Limit and the Class 4 Upper Profits Limit for National Insurance contributions will be aligned with the point at which the higher rate tax becomes payable (£41,450).
From 2013-14, the top rate of income tax will be reduced from 50% to 45%.
The age-related income tax personal allowance for people between 65 and 74 will be £10,500 in 2012-13, but restricted to people born between 5 April 1938 and 5 April 1948. The allowance of
£10,660 for 2012-13, available to people aged 75 and over will be restricted to people born
before 6 April 1938. From 2013-14, these allowances will not be increased and those born after
5 April 1948 will benefit from the standard personal allowance of £9,205 for 2013-14, rather than the age related allowance.