Following the Chancellor’s Autumn Statement some careful tax planning may be useful to help you optimise your tax position.
For those aged under 65 the personal allowance will be increased from £8,105 to £9,440 from April 2013. This increase in the personal allowance is greater than expected and is part of the plan of the Coalition Government to ultimately raise the allowance to £10,000.
The reduction in the personal allowance for those with ‘adjusted net income’ over £100,000 will continue. The reduction is £1 for every £2 of income above £100,000. So, for next tax year the allowance will cease when net adjusted income exceeds £118,880.
Talk to us about: Planning before 6 April 2013 where adjusted net income is expected to exceed £100,000. Broadly speaking, adjusted net income is taxable income from all sources reduced by specific reliefs such as gift aid donations and pension contributions. We can advise whether these adjustments could be made to protect some or all of your personal allowance. Alternatively, if you have your own company, we can help you consider the timing of dividend receipts from the company.
Tax band and rates 2013/14
The basic rate of tax is currently 20%. The band of income taxable at this rate is being reduced from £34,370 to £32,010 from 6 april 2013 so that the threshold at which the 40% band applies will fall from £42,475 to £41,450.
The 50% band currently applies where taxable income exceeds £150,000 but the rate will fall to 45% next tax year.
Dividend income is taxed at 10% where it falls within the basic rate band and 32.5% where liable at the higher rate of tax. Where income exceeds £150,000, dividends are taxed at 42.5% this year and 37.5% from next year.
Talk to us about: Planning before 6 April 2013 where income is expected to exceed £150,000. We can help with decisions such as deferring income until next tax year or considering the use of specific reliefs such as gift aid donations and pension contributions.
A full summary of the Chancellor’s Autumn Statement is available by following this link.
It has been announced that the date of the next Budget will be Wednesday 20th March 2013.