By ACCA’s budget team
- Increases in the allowances for next year as announced- but a hike in 2013/14 to close in on the £10,000 target;
- a phasing out of age allowances;
- once again the mention of amalgamating tax; and
- NIC and the top tax rate drop to 45%.
For 2012-13 the personal allowance will be increased by £630 to £8105. The basic rate limit will be reduced by the same amount (£630) to £34,370. For 2013-14, the personal allowance will increase further, by £1,100 to £9,205. This is another step towards the government’s aim of personal allowances at £10,000. In 2013-14, the basic rate limit will however be reduced by £2,125 to £32,245, placing many more thousands of tax payers into the higher rate tax band.
The national insurance contributions Upper Earnings Limit and Upper Profits Limit will continue to be aligned with the level of the higher rate threshold.
Income tax rates remain unchanged for 2012-13. However for 2013-14, the additional rate of income tax will be reduced from 50% to 45%. Basic rate and higher rate tax will remain the same at 20 % and 40% respectively. The dividend additional rate will be set at 37.5% from 2013-14.
Higher personal allowances for people aged 65 and over are to be phased out from 2013-14. In 2012-13 an age-related personal allowance of £10,500 is available for people aged 65 to 74, and £10,660 for people aged 75 and over.
From 2013-14, these allowances will not be increased. Also from 2013-14, the allowance of £10,500 will be restricted to people born after 5 April 1938 but before 6 April 1948; and the allowance of £10,660 will be restricted to people born before 6 April 1938.
From 2013-14, people born after 5 April 1948 will be entitled to a personal allowance of £9,205.
A consultation document on integration tax and NI will appear soon. It will look at the range of options that are available to integrate the operation of income tax and NIC for employees, employers and the self-employed.
Remember, you can see ACCA’s budget blog from yesterday, here.