News: March 2013
Budget 2013: Individuals
The standard personal allowance will rise to £10,000 from 6 April 2014, a year earlier than expected. The age related allowances are frozen until 2015. The allowances as they have been announced for 2013/14 are:
Personal allowance (born after 5 April 1948): £9,440
Personal allowance (born between 6 April 1938 and 5 April 1948): £10,500
Personal allowance (born before 6 April 1938): £10,660
Minimum married couples allowance*: £3,040
Maximum married couples allowance*: £7,915
Blind person’s allowance: £2,160
Income limit for allowances for age related allowances: £26,100
Income limit for standard allowances: £100,000
* given where one partner was born before 6/4/1935, as 10% reduction in tax due.
Income Tax Bands and Rates
The income tax bands for 2013/14 are:
Savings rate* (10%) – 0 to £2,790
Basic rate (20%) – 0 to £32,010
Higher rate (40%) – £32,011 to £150,000
Additional rate (45%) – over £150,000
*The savings rate of 10% only applies if the individual’s net non-savings income does not exceed the savings rate limit.
The additional rate was reduced from 50% in 2012/13.
The higher rate and basic rate thresholds can be increased by paying personal pension contributions or gift aid donations.
The annual allowance and lifetime allowance will both reduce in 2014/15 as shown below. The annual allowance can be expanded by unused amounts of allowance brought forward from the previous three tax years.
The lifetime allowance limits the amount of tax advantaged funds a person can draw on at retirement. If the pension fund is greater than the lifetime allowance when the scheme member starts to take his benefits, the excess is taxed at 55%. Individuals with funds that already exceed the lifetime allowance can apply for fixed protection of the existing value of their fund.
Annual allowance: 2012/13: £50,000, 2013/14: £50,000, 2014/15: £40,000
Lifetime Allowance: 2012/13: £1,500,000, 2013/14: £1,500,000, 2014/15: £1,250,000
Some individuals can choose to drawdown amounts from their pension fund instead of buying an annuity with the funds on retirement. The maximum amount of the permitted drawdown is increased from 100% of the equivalent annuity value of the fund, to 120% of that same annuity value. This change comes into effect from 26 March 2013.