It’s the start of a new tax year in the UK. This means that there are various important changes to income taxes which are almost certain to affect you. Whether you’re employed, self employed or a pensioner, the tax changes in 2012 will probably affect what tax you pay. But what are the changes?
Keep reading to learn more about the tax changes that will affect you in 2012.
How much can you earn before paying tax in 2012?
Your Personal Allowance is the amount of money that you’re allowed to earn before you start to pay tax. You may also be eligible for additional allowances such as a Married Couples Allowance or Blind Person’s Allowance. From 6 April 2012, the tax-free allowances that most people in the UK benefit from are changing.
The changes can be summarised as:
- Personal Allowance for people up to age 65 – In 2012 this rises to £8,105 (from £7,475). This means you can earn up to £8,105 before you start to pay tax in 2012/13
- Personal Allowance for people aged 65 -74 – In 2012 this rises to £10,500 (from £9,940). This means you can earn up to £10,500 before you start to pay tax in 2012/13
- Personal Allowance for people aged 75 and over – In 2012 this rises to £10,660 (from £10,090). This means you can earn up to £10,660 before you start to pay tax in 2012/13
- Married Couple’s Allowance – In 2012 this rises to £7,405 (from £7,295)
- Blind Person’s Allowance – In 20120 this rises to £2,100 (from £1,980)
These changes to allowances are likely to affect your tax code for the tax year 2012/13 (the tax year which runs from 6 April 2012 to 5 April 2013). The standard tax code for someone under the age of 65 with a full Personal Allowance and no other allowances/deductions will be 810L (it was 747L in tax year 2011/12).
Change to the rate at which you start paying the higher rate of tax
From 6 April 2012 there is also a change to the point at which you start paying the higher rate of tax (40%).
The point at which you will pay the higher rate of Income Tax has decreased by £630 from £35,000 to £34,370 in 2012/13. This is to balance the £630 increase in the personal allowance for people aged under 65. This means that you’ll pay 40% tax on any taxable income you earn over £34,370.
Tax Credits changes 2012
As well as changes to tax allowances and the rate at which you start to pay higher rate income tax, there are also significant changes to tax credits in 2012.
The two main changes to tax credits are:
- a reduction in the income limit for child tax credit, from about £40,000 to about £26,000 for a family with one child
- an increase in the number of hours couples with children have to work to be eligible for working tax credit. You’ll now have to work 24 hours per week rather than 16 hours