Budget 2012

The recent budget has received much commentary in the national press and on various Internet sites. At first sight it seems quite innocuous, but there certainly is a sting in the tail on further view.

The good news is that, as previously promised, the Personal Allowance, the amount that can be earned be any individual without paying tax, is increasing to £8,105 from April 2012, with a further increase to £9,205 in a year’s time. So, an income of around £155 a week, or £175 in a year or so’s time, can be earned without paying any tax at all.

After this, there have been various small alterations to the tax thresholds, but the main point that initially perhaps did not receive much attention, but which certainly has been centre stage subsequently, is the decision that the Chancellor announced to do away with the higher level of Personal Allowance that pensioners have received since, apparently, 1925. This measure will align the tax free amounts that can be earned with those aged under 65 and could result in a reduction in income of around £200 a year from the 2013/14 tax year onwards for many pensioners.

These two measures certainly illustrate the ongoing need to ensure that individual’s tax affairs are arranged sensibly. If you have a small family company, and your children (aged over 16) do assist in the running of the business, then paying them a salary of up to the Personal Allowance tax-free is a most generous concession that should be taken advantage of. And, as pensioners, it becomes ever more important to ensure that income is divided, where possible, equally between both spouses, to minimise the effect of the reduced tax-free allowance detailed above.

And, on a slightly more humorous note, you may be pleased to learn that caviar is still zero rated for VAT, whereas the cost of sausage rolls, pies and pasties may be increasing shortly, with the Chancellor deciding that VAT is to be added to these baked products which have previously been zero rated. So, take your fill, before the expected cost increase in October!

For any discussions on these points, or other matters, please call either Jeremy Fozzard or Mark Williams

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