Autumn Statement surprises

The Chancellor’s Autumn Statement had a few surprises to set against the gloomy economic forecasts.

The Autumn Statement, together with a raft of draft legislation issued a week later, has revealed a good slice of what will be in the spring Budget. There is still likely to be the odd rabbit-out-of-the-hat, which all Chancellors find difficult to resist, but the broad outline is clear.

Income tax The main personal allowance will rise by £630 to £8,105 in 2012/13. Other allowances, such as the personal age allowance, will rise by 5.6%. However, you will not gain the full benefit of the increased personal allowance if you are a higher or additional rate taxpayer, as the basic rate band will shrink by £630 at the same time, leaving the higher rate tax starting point unaltered at £42,475. The £100,000 starting point for phasing out the personal allowance and the £150,000 additional (50%) tax threshold are also unchanged.

National insurance contributions (NICs) After the 1% increase in all rates in 2011/12, NICs rates will generally be unchanged in 2012/13. The lower thresholds will increase in line with inflation, while the upper thresholds are frozen. However, the changes to contracting out could mean your NICs bill rises in 2012/13 (see ‘The pensions revolution continues’).

Capital gains tax (CGT) In a surprise move, the Chancellor announced that he would be freezing next tax year’s annual CGT exemption at £10,600 rather than increasing it in line with the consumer prices index, as he had previously announced.

Tax credits For 2012/13 the child element of the Child Tax Credit (CTC) and disability elements of Working Tax Credit will rise by 5.2%, while all other tax credits will be frozen. However, if you currently receive the family element of CTC, worth a maximum of £545 a year, you may find that it disappears in the new tax year. This stems from a change originally announced in June 2010, bringing down the income threshold at which the credit is phased out from the current £40,000. More recently, there have been reports that the Government is looking at taking CTC away from higher rate taxpayers.

The value of tax reliefs depends on your individual circumstances. Levels, bases and reliefs from taxation are subject to change. The Financial Services Authority does not regulate tax advice.