After much media commentary, hype and conjecture, it is safe to say there was disappointment all round for the Budget announcement.
When one of the biggest news headlines relates to plans to place VAT on the humble pasty, there is surely little hope of an economic recovery anytime soon.
However, there were a few highlights of Chancellor George Osborne’s Budget speech that practice principals should be aware of.
A £1,100 increase in personal allowance for taxpayers under 65 comes into effect for 2013/14, rising from £8,105 to £9,205, and not far from the government’s eventual planned goal of £10,000 personal allowance.
Designed to help those on lower incomes only, the increase in personal allowance will be offset by reducing the 20% income tax threshold from £34,370 to £32,245 for the next tax year.
The 50% ‘super tax’ rate for income over £150,000 will decrease to 45% for 2013/14. This, however, doesn’t apply to income from dividends, which will in fact drop from 42.5% to a 37.5% tax rate from 6 April 2013.
Two areas of particular interest, which were not mentioned in the Budget, include personal allowance for those earning in excess of £100,000 and concerns about pensions.
There was disappointment over the lack of action by the Government to re-establish the personal allowance for earners of £100,000 income.
Because of this, taxpayers will continue to receive a hefty bill on the 60% rate of tax.
Prior to the Budget announcement, there was speculation that tax relief on the higher-rate of pension contributions would be abolished. Happily, this did not turn out to be the case.
As it happens, taxpayers will maintain tax relief on contributions to their retirement fund at their marginal rate of income tax, be it 20%, 40%, 50% or 60%.
For now, pensions are generally a better bet than ISAs when it comes to protecting your money from tax.
For more information, visit www.lansdellrose.co.uk or call Lansdell & Rose on 020 7376 9333.