Tax Rates and Allowances for 2013

As you know the new tax year commenced on the 6th April, but what will it mean for you?

Your personal allowance (the amount of income you can keep before paying tax) will increase from £8105 to £9440.

The personal allowance for older people has been frozen at the same levels as 2012/13. For those born before 6 April 1948 it is £10,500 and for those before 6 April 1938 it is £10,660.

However, the extra is means tested and will be withdrawn at the rate of £1 for every £2 your income exceeds £26,100. For those born before 6 April 1948 this means they get no additional allowance once their income exceeds £28,220. For those born before 6 April 1938 the cut off is £28,540.

The threshold at which higher rate tax is payable at 40% will fall in 2013/14 from £34,370 to £32,010. This is taxable income and so excludes your personal allowance.  It is estimated that 400,000 taxpayers will be caught by the lower threshold and pay 40% tax for the first time.

The top rate of income tax falls in 2013/14 from 50% to 45%. The additional rate applies to those whose taxable income exceeds £150,000. These high earners get no personal allowance, as it is withdrawn at the rate of £1 for every £2 your income exceeds £100,000 and is lost altogether at £118,880.

Tax on dividends falls for additional rate taxpayers from 42.5% to 37.5%.

The amount you can save tax-free in an Isa rises from £11,280 to £11,520. A maximum of £5760 can be saved in a cash Isa and a further £5760 can be invested in a stocks and shares Isa. For Junior Isa’s the new limit is £3,720.

The nil-rate band above which Inheritance Tax is payable at 40% will not change and remains at £325,000 and the government has indicated it will remain frozen at this level until 2018.

The basic rate pension will rise from £107.45 to £110.15 per week.

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