Following Budget 2012, here are the rates, tax bands, and allowances for the 2012/13 tax year – with particular reference to limited companies.
- The main rate of Corporation Tax has been cut from 26% to 24% from 1st April 2012, and will be cut to 23% in 2013/14 and 22% in 2014/15. The main rate is paid on profits of £1.5m+
- The ‘small profits tax rate’, which applies to most limited companies remains at 20% on profits up to £300,000 per year.
- Between the small profits and main rate, a complex system of ‘marginal relief’ applies.
- Find out more in our Corporation Tax guide.
Value Added Tax
- The registration threshold is £77,000, and the deregistration threshold is £75,000 from 1st April 2012.
- The standard rate of Value Added Tax remains at 20%
- Find out more in our Value Added Tax guide.
Income Tax – Personal Allowance
- The personal allowance for the 2012/13 tax year is £8,105 (up from £7,475).
- For every £2 you earn over £100,000 per year, you lose £1 of the personal allowance, creating a massive marginal tax rate of 60% between £100,000 and £16,210.
- The personal allowance will increase by a further £1,100 in the 2013/14 tax year to £9,205.
Income Tax Bands
- The basic rate (20%) applies to income up to £34,370.
- The higher rate (40%) applies to income from £34,371 to £150,000.
- The additional rate (50%) applies to income of £150,000 and over.
- The higher rate threshold will fall once again in April 2013.
Dividend Tax Rates
- The same income tax bands listed above are used to calculate your dividend tax liability. Once the 10% tax credit is taken into account, the effective tax rate is listed in brackets):
- The basic rate is 10% (0% – no further tax to pay)
- The higher rate is 32.5% (25%)
- The additional rate is 42.5% (36.1%)
- Find out more information on our guide to tax on dividends.
National Insurance Contributions
- Limited companies and their employees are subject to Class 1 NICs. The self-employed (sole traders, partnerships) are liable to Class 2 and Class 4 NICs.
- The employers’ NIC rate is 13.8% on weekly earnings above £144.
- The employees’ NIC rate is 12% on earnings between £146.01 and £817 per week, and 2% on earnings above £817 per week.
- Class 2 NICs are £2.65 per week for the 2012/13 tax year.
- Class 4 NICs are 9% of annual profits between £7,605 and £42,475 per year, and 2% on profits above £42,475 per year.
- For more background information, read our guide to National Insurance.
Pensions savings tax relief
- The annual allowance limit remains at £50,000.
- The lifetime allowance has been cut from £1.8m to £1.5m from April 2012.
Individual Savings Accounts (ISAs)
- The total limit for an ISA in 2012/13 is £11,280, of which £5,640 can be held in cash.
Capital Gains Tax
- The basic and higher rates of CGT remain in 2012/13 – 18% and 28% respectively.
- The lifetime limit for Entrepreneurs’ Relief is £10m, and the tax rate remains at 10%.
Stamp Duty Land Tax
- No tax applies to property purchases up to £125,000.
- 1% tax on homes between £125,001 and £250,000.
- 3% tax on homes between £250,001 and £500,000.
- 4% tax on homes between £500,001 and £1m.
- 5% tax on homes between £1m and £2m.
- New 7% tax on homes worth more than £2m.
Corporation Tax allowances and reliefs
- Annual Investment Allowance (AIA) has been slashed from £100,000 to £25,000 for the 2012/13 tax year.
- Plant & Machinery – main rate is 18% (down from 20%), the special rate is 8% (previously 10%) for 2012/13.
- R&D tax credits (for small businesses) is 225%.
- First year allowances remain at 100%.
- The England standard multiplier is 45.8p (up from 43.3p)
- The England ‘small business’ multiplier is 45p (up from 42.6p)