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Personal taxes: 45p top rate and £10k allowance take shape
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.