2012 Chancellors Autumn Statement – Principal Changes – Personal tax and benefits

  • The basic Personal Allowance, due to anyone born after 6 April 1948, will increase in April 2013 to £9,440 (2012-13 £8,105). The increase in the Personal Allowance is £235 more than expected and will save basic rate tax payers up to £267 in a full tax year.
  • For those born between 6 April 1938 and 5 April 1948 the Personal Allowance is unchanged at £10,500 from April 2013. The equivalent allowance for those born before 5 April 1938 is unchanged at £10,660 from April 2013. The income limit, above which the increased allowance for the elderly are reduced, is increased to £26,100 (2012-13 £25,400) from April 2013.
  • The basic rate of Income Tax remains at 20% and will apply to the first £32,010 of taxable income (2012-13 £34,370). If your taxable income exceeds £32,010 you will pay tax at the higher rate of 40% until your income exceeds £150,000 when the additional rate of 45% kicks in.
  • The threshold for the 40% rate of Income Tax is to rise by 1% in 2014 and 2015 from £41,450 to £41,865 and then £42,285.
  • Capital Gains Tax annual exempt amount will be increased by 1% in 2014-15 and a further 1% in 2015-16 reaching £11,100.
  • Child Benefit rates are frozen for 2013-14 and will increase by 1% in 2014-15 and 2015-16.
  • Tax credits disability elements are increased in line with Consumer Price Index (CPI). Other elements are either frozen or will increase by 1% in 2013-14. All rates are increased by 1% in 2014-15 and 2015-16.
  • Guardian’s Allowance is increased in 2013-14 in line with the CPI.
  • State pensions will increase by 2.5% to £110.15 per week from April 2013.
  • For 2013-14, there are no changes to the percentage rate of contribution for Class 1 and Class 4 National Insurance Contributions (NICs) but there are changes to all of the thresholds and limits.

Pensions Savings – tax relief
The expected decrease in tax relief on pension contributions was confirmed. However, the change will not be applied until 6 April 2014. For the tax year 2014-15 onwards:

  • The annual allowance for pensions tax relieved savings will be reduced from £50,000 to £40,000.
  • The standard lifetime allowance for pensions tax relieved savings will be reduced from £1.5 million to £1.25 million.
  • A transitional ‘fixed protection’ regime will be introduced for those who believe they may be affected by the reduction in the lifetime allowance.

The lifetime allowance is the maximum amount of pension contributions you can make that benefit from tax relief. If the lifetime allowance is exceeded, a lifetime allowance charge is levied on the excess. This is presently 55% if excess is paid as a lump sum and 25% is paid as a taxable pension.
Legislation will be introduced in Finance Bill 2013 to make these changes and will be published in draft on 11 December 2012.
This is one of the few measures introduced to increase the tax take from higher income earners.

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