The new tax year starts today, bringing with it some changes to the system – including a rise in National Insurance contributions. Detailed below are the key changes.
Income tax
More tax payers will be included in a higher tax bracket, although the point at which income tax becomes payable increases for the average person under 65 by £1,000.
An average person under 65 will now pay tax at the higher rate of 40% once taxable income reaches £42,475 (2010/11: £43,875 ).
Detail:
- Personal tax allowance (age under 65) rose by £1,000 p.a. from £6,475 to £7,475 p.a. Age 65-74 rose from £9,940 to £9,490 p.a. Age 75 and over from £9,640 to £10,090 p.a.
- No personal tax increases. 50% top rate of tax to remain.
- Basic rate band (20%) reduced from £37,400 to £35,000.
Companies
Corporation tax rate has been cut by 2% from April 2011 (not 1% as previously planned), but only for large companies. The small company rate has reduced by 1%.
Detail:
- Corporation Tax rates:
| Years(s) to 31 March | 2012 | 2011 |
| Companies earning < £300k | 20% (from £1 to £300k) | 21% (from £1 to £300k) |
| Companies earning between £300k and £1.5m | 20% on first £300k27.5% on excess | 21% on first £300k29.75% on excess |
| Companies earning over £1.5m | 26% | 28% |
National Insurance
The government has increased the main rate at which National Insurance is charged.
The employee contribution rate for those who qualify rose from 11% to 12% and employer contribution rate from 12.8% to 13.8%.
The rate for self-employed (class 4) increased from 8% t0 9%.
For a full table go to http://www.hmrc.gov.uk/rates/nic.htm
Inheritance tax
No increase in nil rate threshold of £325,000.
10% discount on inheritance tax for people leaving 10% of estate to charity
Stamp duty
A new stamp duty rate of 5% is charged on residential property purchases of more than £1m.
Pensions and benefits
Pension contributions that qualify for tax relief have reduced to an annual allowance of £50,000 instead of the previous limit of £255,000.
Tax relief for employer-supported childcare is no longer available to high-earners who start to receive the benefit on or after 6 April.
Universal child benefit has been frozen for three years from April, at £20.30 for a first or only child and £13.40 for each other child.
Changes to the thresholds in the tax credits system will see payments reduce faster as income rises.
Savings
The annual Individual Savings Account (Isa) limit has increased from £10,200 to £10,680, or £5,340 for a cash-only Isa. Half, or all, of the Isa total can be saved in stocks and shares.
