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Autumn Statement 2012

5th December 2012

The Chancellor has today announced the pre-budget statement.  Within the statement, it is proposed that the measures included are intended to be fiscally neutral in that tax increases will be matched by tax cuts. 

The strategy for the proposed tax changes is not to significantly increase personal taxation for the  higher earners but to deliver a fair taxation landscape for all. 

As an employer, it is important to consider the changes that have been proposed to come into effect in 2014/2015.  Now is the time to consider the opportunities available to employees in order to maximise their pension contributions and enjoy higher rate tax reliefs prior to any changes coming into effect.

Income Tax

The threshold for 40% rate of income tax is set to increase by 1% in 2014/15 tax year

Annual Allowance and Lifetime Allowance reductions

From April 2014/15 the annual allowance rate will reduce to £40,000 from £50,000 and the Lifetime allowance currently set at £1.5m will reduce to £1.25m.

What should your employees consider:

  • Before April 2013 consider using any unused carry forward allowance from 2009/10 based on annual allowance rate of £50,000
  • Income in excess of £150,000 – paying pension contributions in this tax year provides tax relief of 50%, this will reduce to 45% in 2013/14 tax year
  • Increased personal allowance for 2012/13 to £9,440 from the previous announcement of £9,205 expands the opportunity to enjoy 60% tax relief on pension contributions from next April
  • An opportunity to apply for fixed protection similar to previously which may include more personal choices

So what hasn’t changed?

  • Pension contributions will continue to receive full tax relief
  • Tax free pension commencement lump sums up to 25% are to remain unchanged

To ensure you understand the impact of the autumn statement 2012, please contact us.

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