Tax rates and allowances
Tax rates and allowances change each year - both because they're index-linked, and because governments tinker with, or in some cases radically alter, them. Most changes are announced in the annual Budget.
In March 2011, there was a lot of speculation about whether the Chancellor would increase the tax-free personal allowance by an extra £600 on top of a £1,000 increase that had already been announced.
In fact, there were no changes to the 2011/2012 year, but as of now (April 2012) there is an increase of £630 in the personal allowance. So, it had previously increased by £1,000 to £7,475 in 2011/12, and now for 2012/13 it has increased to £8,105.
"Personal tax allowances are, unfortunately, not transferable, or otherwise all the SAHMs would be letting their spouses have theirs. But if you're a SAHM, make sure all savings are in accounts in his name only, and he then applies to have the interest paid gross (tax free)." Scaryteacher
The increase may be good news for many Mumsnetters, but the thing to bear in mind is that the higher rate income tax threshold is also falling, so this may offset the tax advantage for bigger earners.
Here are the main tax rates and allowances for 2012/13:
- Income tax: the Personal Allowance rises by £630 to £8,105. For incomes of £100,000, the value of the personal allowance is removed by £1 for every £2 over the threshold.
- Income Tax - Taxable Bands: the basic 20% rate of income tax applies between £0 and £34,370. The higher 40% rate applies between £34,371 and £150,000. And the additional 50% rate applies on income above £150,000.
- National Insurance (NICs): the employers' NIC rate stays at 13.8%. The employee's NIC rate remains at 12%.
- Dividend Tax: the tax rates on dividends remains unchanged for the 2011/12 tax year, ie 10% for dividend income up to the £34,370 threshold; 32.5% for higher rate income between £34,371 and £150,000; and 42.5% for additional rate income over £150,000.
- Pensions Savings - Tax Relief: the lifetime allowance has been cut from £1.8m to £1.5m for 2012/2013. There is no change to the annual allowance however.
- Capital Gains Tax: the standard CGT rate for individuals remains at 18% (basic rate), and 28% (higher rate).
- Inheritance Tax: the IHT threshold remains at £325,000. IHT above this threshold is 40%. A reduced rate of IHT of 36% has been introduced in April 2012 where 10% of more of the net estate is left to charity.
- ISAs: the ISA limit is £11,280 (from 10,680), £5,640 of which can be saved in cash.
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Last updated: 2 months ago