Most Taxpayers Will Benefit From Increase in Personal Allowances, says Baker Tilly
Posted on:
24
Mar
2011
by Huw Thomas
According to accountancy and business advice firm Baker Tilly, the £630 increase in personal allowance will be good news for almost all taxpayers.
In his budget speech, Chancellor George Osborne announced that the basic personal income tax allowance will increase to £8105 in 2012/2013, up from £7475 for 2011/2012. Payers of the higher 40 percent tax rate will also benefit as the higher rate income tax threshold will increase to £43,105 from £42,475.
“While most people will benefit from this increase in personal allowance, those who receive no personal allowance will not,” says Gary Heynes, joint head of private client tax at Baker Tilly. “This principally includes non-domiciliaries claiming the remittance basis and anyone whose income exceeds £116,210. The basic rate band will remain £35,000, so there will be no marginal losers around the basic/higher rate band margin.”
A personal allowance increase of £1000 for 2011/12 was announced in June 2010 with the aim of increasing the basic allowance to £10,000 by the end of the current Parliament. However, higher rate taxpayers saw their allowance effectively frozen by the narrowing basic rate income tax band. In 2012/13 the increase in personal allowances will not be accompanied by any restriction on the basic rate band which means that higher rate taxpayers will also benefit from the increase provided their gross income doesn’t exceed £100,000.
Personal allowances are withdrawn for taxpayers with income higher than £100,000 at a rate of £1 for every £2 above that cut off point. As a result, anyone with an income higher than £116,210 will receive no personal allowance in 2012/2013.
