Main Provisions affecting the majority of people are as follows:
Personal Allowances
It had already been announced that for anyone under 65 the personal allowance will be increased by £630 to £8,105. The allowance is reduced by £1 for every £2 of adjusted net income over £100,000. So for 2012/13, the allowance ceases at adjusted net income in excess of £116,210.
It has now been announced that for 2013/14 the personal allowance is to increase to £9,205. However, from the same date the age allowance will be frozen at the current level for anyone born on or before 5th April 1948, and withdrawn completely for anyone bormn after that date.
Tax Rates
For 2012/13 the basic rate of tax remains at 20% and higher rate at 40%. The higher rate remains chargeable on income above £42,475, meaning that the basic rate tax band is reduced to £34,370 to compensate for the increased personal allowance. The 50% additional rate of tax applies where taxable income exceeds £150,000.
For 2013/14, the basic rate tax band is further reduced to £32,245 meaning that higher rate tax will be payable on income above £41,450. The additional rate of tax will be reduced to 45%.
Dividends
Dividend income remains taxable at 10% where it falls within the basic rate band, 32.5% where liable at the higher rate of tax and 42.5% where liable to the additional rate of tax. In 2013/14 the rate when chargeable at the additional rate of tax will fall to 37.5%
Tax on Child Benefit
There will be a new charge on a taxpayer who has adjusted net income over £50,000 in a tax year where either they or their partner are in receipt of Child Benefit for the year. Where both partners have adjusted net income in excess of £50,000 the charge will apply to the partner with the higher income. The charge will be 1% of the full Child Benefit award for each £100 of income between £50,000 and £60,000. The charge on taxpayers with income above £60,000 will be equal to the amount of Child Benefit paid.
Child Benefit claimants will be able to decide not to receive Child Benefit if they or their partner do not wish to pay the new charge.
This charge will have effect from 7 January 2013 and for 2012/13 will apply to the Child Benefit paid from that date to the end of the tax year. The income taken into account will be the full income for 2012/13.
Other changes relating to personal tax include:
– A cap on unlimited tax reliefs
– A Statutory Residence Test
– Abolition of Ordinary Residence
– Changes to the rules for non-domiciled individuals
Corporation tax rates
The already announced fall of 1% in the main rate of Corporation Tax from 1 April 2012 is now to be 2%, reducing it from 26% to 24%. Further 1% reductions to 23% and 22% are to take place from 1 April 2013 and 1 April 2014 respectively. The small company rate will remain at 20%.
Annual Investment Allowance (AIA)
The 100% AIA on Capital Expenditure is to be reduced to £25,000 from £100,000 with effect from 1 April 2012 for companies and 6 April 2012 for unincorporated businesses. Where a business has an accounting period that straddles the date of change the allowances have to be apportioned on a time basis.
Writing Down Allowances (WDA)
As previously announced, the main rate of WDA will be reduced from 20% to 18% and the lower rate of 10% which applies to integral features and long-life assets will reduce to 8%.
Capital allowances on cars
The 100% first year allowance (FYA) available on new low emission cars purchased (not leased) by a business is extended but will generally available where a car’s emissions do not exceed 95 grams per kilometre (gm/km) after 31 March 2013. Until then, the limit remains at 110 gm/km. Similar reductions apply for higher emission cars which qualify for the main rate of WDA.
Capital Gains Tax
The annual exemption is frozen at £10,600. Both the main rates and the entrepreneurs rate remain the same at 18% (28% for higher rate taxpayers) and 10% respectively. The lifetime limit for entrepreneurs relief is £10m.
Inheritance Tax
The Nil Rate band remains at £325,000. The rate remains at 40% generally, but a lower rate of 35% will be introduced if a minimum of 10% of the estate is left to charity.
If you have received a penalty for late filing of a 2011 tax return, but do not know why you have received one in the first place ………
……… then you can telephone the tax office and if they agree then they will cancel both the tax return and the penalty. This is not the same as the normal appeal procedure which requires that you have a “reasonable excuse” for not returning it on time. A reasonable excuse under the normal appeal procedures would include serious illness or death of the taxpayer or a close family member, unexpected postal delays, or a delay on the part of the tax office to provide required authorisation codes, etc. It would not include the individual considering that a tax return is not required in their particular circumstances.
This therefore seems to be that someone in the government has suddenly got very nervouse about pensioners and low income earners suddenly finding penalty notices on their doorsteps. After all, it seems that 900,000 tax returns have not been returned by the due date, and on past history it seems that about a third will not have any tax due for a variety of reasons. However, if you do try and get your return and penalty notice cancelled then be aware that we have already tried to do so on one occasion and that person did not fall within the tax office’s guidelines for doing so. Strangely, this would have also applied to the penalty notice issued to the former client who died in 2009 ………..