The personal allowance for 2012 /2013 is going to come into effect as of 6th April 2012.
In the tax year 2011/12, you can earn up to £7,475 completely income tax-free. As of 6th April 2012, the personal tax allowance 2012/2013 will be £8,105.
If you are the director of a limited company, and currently pay yourself as tax efficiently as possible through payroll, then the maximum you can pay yourself per month, without paying any income tax (national insurance not included in this example), will increase from £629.92 to £675.42.
How The New Personal Tax Allowance 2012 – 2013 Affects You
To show you how this could affect you if you’re an employee, see the example below.
Mr A is an employee of Keepers. He earns £20,000 per year before tax. (This example does not account for National Insurance Contributions)
Tax Year 2011 – 12
£20,000 - £7,475 = £12,525 @ 20% = £2,505 of tax to be paid, leaving Mr A with £17,495 take-home pay for the year 2011/12.
Tax Year 2012 – 2013
£20,000 - £8,105 = £11,895 @ 20% = £2,379 of tax to be paid, leaving Mr A with £17,621 take-home pay for the year 2012/13.
This means that, after the changes in Personal Tax Allowance 2012/2013, Mr A will see £126 more money in the 2012/13 tax year.
If you have any questions or comments regarding Personal Allowance 2012 – 2013, please leave a comment below, or you can use our Ask an Accountant service.