The Budget 2013 Commentaries - Personal And Trust Taxes

The commentaries below are written in general terms. Details can also be found in our downloadable Budget Report brochure, which will be available shortly. You are strongly recommended to seek specific advice before taking any action based on the information given, both in the commentaries and in the publication.

Income tax rates and thresholds Income tax and national insurance contribution (NIC) rates and thresholds will remain at their 2012/13 levels in 2013/14, except where noted below. All thresholds are set out in the Appendix.

The personal allowance for those individuals born after 5 April 1948 will increase by £1,335 to £9,440 for 2013/14. The upper threshold of the basic rate band will be reduced by £2,360 to £32,010.

For 2014/15, the personal allowance for individuals born after 5 April 1948 will increase to £10,000. Again, there will be a decrease in the basic rate band this time by £145 to £31,865.

The additional rate of income tax will be reduced from 50% to 45% and the dividend additional rate from 42.5% to 37.5% from 6 April 2013.

Comment

The rates and increases for 2013/14 have all been announced in the previous Budget and Autumn Statement.

he increase in the basic personal allowance to £10,000 has been brought forward one year and is a welcome move.

As previously announced, the personal allowances for those born before 5 April 1948 remain frozen. This begins the phasing out of age related allowances to bring them in line with a universal allowance for all.

Cap on tax reliefs As announced in Budget 2012, a cap on certain income tax reliefs claimed by individuals 'sideways' against general income will apply from April 2013.

Comment

This well trailed cap will be introduced in line with the post-consultation proposals. Much of the controversy surrounding the cap when it was first announced at this time last year related to the impact on the charitable sector. As such, gift aid and other charitable donations were quickly excluded. Further representations, via the consultation process, then also led to the exclusion of EIS/SEIS losses and overlap relief from the cap.

Even after these amendments, the cap will still affect many individuals especially in relation to qualifying loan interest and loss relief for shares not within the Enterprise Investment Scheme.

Universal credit The previously announced replacement of the tax credit system with Universal Credit begins its phased introduction from April 2013. It is expected that tax...