If you’re a UK taxpayer, you can expect to see your tax bill change in 2013. Changes to your personal allowance, child benefit and the rates of income tax all come into force in 2013, altering the amount of tax paid by millions of people.
If you want to know how your tax will change in 2013, keep reading.
Your personal allowance will go up
One of the Government’s main commitments has been to ensure that no-one pays tax on the first £10,000 of their income. To do this, they have gradually been increasing your Personal Allowance – the amount of money you are able to earn before you start paying tax.
From April 6, 2013, if you are aged under 65, your personal allowance will be set at £9,205. This represents a £1,100 rise on the previous tax year. It means that you don’t pay any tax on the first £9,205 of your income.
The top tax rate will fall
For the 2013/14 tax year, the three main rates of income tax will be:
- The basic rate of 20 per cent (no change)
- The higher rate of 40 per cent (no change)
- The additional rate of 45 per cent (reduced from 50 per cent in 2012/13)
This means that if you pay the additional rate of tax, you will see the rate of tax you pay fall from 50 per cent to 45 per cent from April 6, 2013.
You won’t get an age related increase to your personal allowance
From 2013/14, your age-related personal allowances will not be increased. You will only be eligible for an age-related personal allowance if:
- You were born on or before 5 April 1948 (for the £10,500 allowance)
- You were born on or before 5 April 1938 (for the £10,660 allowance)
If you were born on or after 6 April 1948, you will be entitled to the personal allowance of £9,205 for 2013/14.
You’ll start paying higher rate tax sooner
In the 2011/12 tax year the basic rate limit was reduced by £2,400 to £35,000. This meant that the higher rate of tax (40 per cent) was applicable to taxable income over £35,000.
For the 2012/13 tax year, the basic rate limit was further reduced by £630. And, in 2013/14, the basic rate limit will be reduced by £2,125 to £32,245.
This means that you start paying the higher rate of tax (40 per cent) on any taxable income you earn over £32,245.
You may start paying tax on your Child Benefit
Is you or your partner’s individual adjusted net income over £50,000 per year, and do you receive child benefit? If the answer to both these questions is ‘yes’, from 2013 you will have to declare this Child Benefit. For most people this will be done through filling in a Self Assessment tax return.
This change comes into force on 7 January 2013.
Alternatively, you can tell the Child Benefit Office that you want to stop receiving Child Benefit payments. In this case you won’t be liable for the new tax charge.