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New Income Tax Year 6 April 2012

05 - 04 - 2012

Tax and benefit changes for the new income tax year come into effect from 6 April 2012

Several tax and benefit changes announced in the Budget and over the last 18 months take effect this month.

 

Already a client of Foremans LLP? You'll receive our Advice Note on tax changes that may affect your business. 

 

Looking for a more general overview? The main changes are summarised below:

 

Income Tax Personal Allowance

 

On 6 April the personal allowance rises by £630 to £8,105 for under-65s.

The upper threshold of the basic rate falls by £630 to £34,370.

 

If you are aged between 65 and 74, the personal allowance rises from £9,940 to £10,500. If you are 75 or over it rises from £10,090 to £10,660. This extra amount will be gradually withdrawn from those with a taxable income between £24,000 and £29,000.

 

There is a gradual withdrawal of the personal allowance for everyone with income over £100,000, regardless of age.

National Insurance

 

The weekly earnings limit (primary threshold) for employees National Insurance Contributions (NICs) at 12% increases from £139 to £146.

 

The lower earnings limit for primary Class 1 NICs increases from £102 to £107.

 

The secondary threshold rises from £136 to £144.


Statutory Pay

 

The standard rate of statutory maternity, paternity and adoption pay is going up from £128.73 to £135.45 per week.

 

Statutory Sick Pay (SSP) rises from £81.60 to £85.85 per week.

Pensions

 

From 9 April the full basic state pension will rise by £5.30 to £107.45.

 

Savings

 

The Individual Savings Account (ISA) allowance rises to £11,280.

 

Up to £5,640 of this can be saved in cash with one Isa provider. The remainder can be invested in stocks and shares with either the same or a different ISA provider.

Child Tax Credits

 

The child element of child tax credits, which is paid to support lower income families, rises by £135 on 6 April.

 

There is no change to the couple and lone-parent elements of working tax credit.

Inheritance Tax

 

The first £325,000 of inheritance when somebody dies remains exempt from inheritance tax. However the rate of inheritance tax for amounts over £325,000 will be cut from 40% to 36% for estates that leave 10% or more to charity.

 

For additional information on the main changes from the Budget 2012 click here.

 

Want help and advice on tax? Why not give us a call on 01244 625 500 or click here to contact us.

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Fixed Data

Assumptions

General                                                                                                                              

• The user is over 21 and subject to tax in the UK
• The user wishes to minimise their tax liability
• The user is subject to national insurance i.e.he/she is not over retirement age
• Only current tax rates and limits are applied
• No tax mitigation payments are made e.g. pension contributions
• Only 3 digit letter 'L' tax codes shown in the drop down list can be entered 
• The user does not have a turnover greater than £100,000 where fewer reliefs and or higher taxes may apply

Expenses

• All miles claimed as expenses are for business use using a personally owned car or van
• All other expenses claimed are wholly, necessarily and where appropriate exclusively for the benefit of the business

Foremans LLP Charges

• Foremans fees associated with Limited Company, Sole Trader or Umbrella are as per published rates
• Foremans current Service Costs are allowed for in all calculations.

Holiday Pay

• Holiday pay is accumulated week by week by Umbrella or Agency employer but paid out during the year

VAT

• Limited Company or Sole Trader will be VAT registered
• Limited Company or Sole Trader will take advantage of Flat rate VAT
• Flat rate applied includes the benefit of the additional 1% applicable to the first year of VAT registration

Limited Company Conditions

• One director / one shareholder in a Personal Service Company
• Director of Personal Service Company elects to vote for 100% dividend after salary, costs and expenses
• Director's salary is maximum salary to the primary threshold for NI
• The Limited Company is trading normally i.e it is not subject to IR35 and is not a Managed Service Company

NOTES

• The Current tax rates are taken from the Fixed Data Table
• The current Value Added Tax Rate is 20% and is applied to all invoices and expenses as appropriate
• The Director's Salary is fixed in relation to National Insurance thresholds. Higher Rate Taxpayers should consider the advantages and disadvantages of a larger annual salary or bonus
• Higher Rate Taxpayers may wish to consider the advantages and disadvantages of shared ownership of their business
• Users with a tax code other than three digits and letter "L" may telephone or email our Development Department to request a detailed calculation
• Generally the use of an Umbrella rather than an Agency payroll is only efficient if sufficient weekly expenses are allowable and claimed
• The expenses claimed under an Umbrella should not prevent the proper operation of National Minimum Wage