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Tax Threshold 2012/13 - 40% Higher Rate Tax Threshold Lowered Again

Posted by Ben Williams on Mon, Mar 19, 2012 @ 01:43 PM

As from April 2012, the Tax Threshold 2012 at which the higher rate tax band applies will lower, from £35,000 to £34,370 - £630 less than the 2011/12 tax year.

This sounds like a lot, but once you take into consideration the rise in the personal allowance, from £7,475 to £8,105, you could actually pay less tax; take a look below.

This financial year, you could earn £42,475 (£35,000 + £7,475) without going over the higher rate tax threshold 2012.

Next financial year, commencing 6 April 2012, you can earn £42,475 (£34,370 + £8,105) per year.

For an example of how this will affect you, see below. (Note: This is for income tax 2012 only, and does not include National Insurance Contributions)

2011-12

£50,000 - £7,475 = £42,525

£35,000 @ 20% = £7,000 (Lower Rate Tax)

£42,525 - £35,000 = £7,525 (This will be taxed at the high rate)

£7,525 @ 40% = £3,010

Total Tax = £10,010

Leftover = £39,990

2012-13

£50,000 - £8,105 = £41,895

£34,370 @ 20% = £6,874 (Lower Rate Tax)

£41,895 - £34,370 = £7,525 (This will be taxed at the high rate)

£7,525 @ 40% = £3,010

Total Tax = £9,884

Leftover = £40,116

As you can see, if you were on a salary of £50,000, not including National Insurance Contributions, you will be paying £126 less income tax per year, due to the lowering of the 40% tax threshold and the increase in Personal Allowance 2012.

If you have any questions, you can use our completely free Ask an Accountant service, or leave a comment below. 

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Topics: Business, Tax, Income Tax, Tax Liability, Tax Increases, 40% Tax Threshold, Higher Rate Tax Threshold, higher rate band lowered