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

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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 2012 individual 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.

Further detail on these rates is available in AccountingWEB’s 2012-13 tax tables.

Other personal tax announcements included:

  • Age-related allowance to be phased out
  • Income tax reliefs cap will hit charities
  • Restriction of child benefit for high earners

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About John Stokdyk

John Stokdyk is the global editor of AccountingWEB UK and


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22nd Mar 2012 11:55

Child benefit tensions

I'm sure some have clients who although they "co-habit" are still fiercely independent of their partners. Mr High earner needs to complete his tax return and lives with Ms Not so high earner who has a number of children from a previous relationship, and her own income. How does he persuade her to tell him how much child benefit she receives if she is unwilling, and indeed why should she tell him anything. At present, if they don't claim tax credits, how would HMRC know they are co-habiting anyway?

Would he have a defence for not complying? Do human rights come into this? So I have to pay more tax because of the child benefit on some-one elses children.

Is this another example of things not being thought through properly by people who don't live in the real world?

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22nd Mar 2012 14:06

talk "medium term/deficit reduction financial strategy"

gone are the days when the chancellor had rabbits to pull out of his hat; now with all his "special advisers/spin doctor" leaks and then a dream that delivers in 12 months time but wacks duty on smokers, drinkers  and motorists straight away......

press comment will be outdated within a week and forgotten about by next april and then with his "OTS" hat on he tries to align corporate savings and personal income tax rates (and vat!) at 20%!!!!!!


soon we will have the GAAR a huge amount of anti avoidance and only one rate of tax to avoid. lets hope the 15% Stamp duty grab on the overseas/landregistry property transfer records are properly investigated by the heavily staffed "compliance side" of HMRC(which he promises to resource) yield more than the 100m he reckons he will get from the 50% tax band(bearing in mind the amount of avoidance going on with this which has lead to "forestalling"


oh yes and we dont need to fight over the european financial transaction tax if the chancellor already has his own bank levy anyway!

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22nd Mar 2012 15:17

he might have quoted adam smith

but this budget was pure gordon.  This is a government that talks a big red tape reduction game, but fails to deliver.  Loads of fiscal drag and a pensions raid.  Dejavue anyone.

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22nd Mar 2012 15:21

Well at least GO has not depended upon pure luck

to get the finances right - I believe all of those indiviudals and businesses queuing up to exit the UK due to the high personal tax rate have turned around....and indeed I hear some are currently disincorporating as we speak in order to pay more tax over.  Those who paid into pensions or deferred dividends are also foaming at the mouth, I believe with the prospect of distributing all of their income in order to pay 45% is irrisistable.  And others have decided to pay salary instead of dividends to ensure maximum taxes are paid.  As for those wealth creating employees (such as bankers) - I understand that they will take cash bonuses instead of shares, such is the good deal they are getting.  So all in all there will be more jobs and more money spent within the uk as well as more taxes collected.


Of course we are all in it together.....I never thought otherwise?!



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22nd Mar 2012 16:10

gordon's luck?

not luck, more a case of riding on the property bubble he created.  I guess like all free-loaders, he did not get off in time.

strangely the thing george has done differently is that he has not sold any gold.  Gordon sold it at the bottom of the market - George did not at the top of the market.  Anyone able to spot a common theme here?

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22nd Mar 2012 16:23

Neither of them have an idea what to do....?

and are unable to relate to real life....

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23rd Mar 2012 10:34

Fairer Higher Rate

Whilst it is right that there should be a higher rate of tax for those earning significantly higher, the 50% rate was to me too high.

45% seems more equitable and raises a little extra for the treasury whilst allowing the individual to retain more than they pay in tax.

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23rd Mar 2012 16:24

still don't get it

....why would people want to voluntarily pay more tax just because the tax rate has gone down????? - no logic at all, the maths just don't make sense....

Which I hasten to add is a different argument from what level we feel is 'fair'....



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04th Jul 2012 19:11

The government is doing all they can for the "poor" people. Now that they've said the poor don't have to pay tax like the rest of society, what more do they want? They want the government to give them money? They want the government to employ them? Give them houses? That's not the role of a government. In a capitalist society, you sell your skills and abilities to the highest bidder, who pays you money based on your skills and qualifications. So the 62.5% band still exists, and even tougher for people who get under it on their pay day, who loose their personal allowance because of the complexity of the system. The government is not santa claus, and the UK is broke.

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