Finance Bill 2012
Finance Bill 2013
The additional rate of income tax will be reduced from 50% to 45% from April 2013 (the equivalent rate for dividends will be 37.5%). The basic and higher income tax rates for 2013/14 will remain at their 2012/13 levels of 20% and 40% respectively.
The Government expects that the cost of the rate reduction will be very small or nil which reflects the HMRC report on the 50% rate and its conclusions that the effect of the 50% rate in 2010/11 on total tax revenues was probably negative. The HMRC report observed that large amounts of income were moved before the introduction of the 50% rate and they have assumed a similar pattern in reverse for a reduction in the rate.
The basic rate limit will be reduced from £34,370 in 2012/13 to £32,245 in 2013/14 to limit the benefit to higher rate taxpayers of the personal allowance increase to below that of a basic rate taxpayer.
The tax free personal allowance for individuals under 65 years old will increase by £630 to £8,105 in 2012/13. There will be a further increase in the personal allowance of £1,100 in April 2013 to £9,205 as part of the Government’s commitment to increase the personal allowance to £10,000.
Existing age related personal allowances for individual above 65 years old will be frozen from 6 April 2013 at their 2012/13 levels until they align with the general personal allowance. From April 2013, age related allowances will no longer be available except for those born on or before 5 April 1948.
The capital gains tax exempt amount for 2012/13 is frozen at the 2011/12 level of £10,600.
The IHT nil rate band is frozen at the current level of £325,000 until 5 April 2015 after which point it will change in line with the Consumer Price Index.
Class 1 primary National Insurance Contributions (NICs) payable by employees will remain at 12% on income between £7,592 and £42,475 line with the higher rate threshold. A rate of 2% applies on income above £42,474.
Class 2 NICs increase to £2.65 per week and Class 4 NICs are payable at a rate of 9% on earnings between £7,605 and £42,475 in line with the higher rate threshold. A rate of 2% applies on income above £42,474.