As might be expected at a time of austerity, there were no significant tax giveaways in the 2012 Budget although there were a number of changes to the personal allowance. The Chancellor, George Osborne, increased the overall level of the personal allowance for everyone by £1,100 to £9,205 from April 2013.

He also started the process of merging age-related allowances with the personal allowance – the so-called ‘granny tax’.

In the next tax year, the age-related allowance for over-65s will increase from £9,940 to £10,500, but then they will be frozen at 2012/13 levels until they align with the personal allowance. From April 2013, age-related allowances will no longer be available to anyone born after 1948 (those now 64 and under).

The higher rate tax band was frozen at £42,475. HMRC confirmed an additional 300,000 people will pay higher rate tax from 2013/14 when the higher rate threshold is cut from £42,475 to £41,450. As expected, the 50% tax rate was reduced to 45% from April 2013, which should have a knock-on effect on available pension reliefs and will make tax wrappers more valuable for an increasing number of people.

The chancellor also introduced a limit on all uncapped income tax reliefs. This has been brought in to target individuals who set up loss-making businesses solely to claim tax relief and so does not apply to pensions. For anyone seeking to claim more than £50,000 of relief, a cap will be set at 25% of their income.

Osborne continued to raise rates of Stamp Duty Reserve tax – having raised the threshold to 5% on homes valued above £1m, homes over £2m will now attract duty at 7%. He also clamped down on avoidance schemes, levying a 15% tax on companies buying residential property.

In a move to target the practice of buying residential property through offshore companies, Osborne also announced plans to extend the capital gains tax regime to gains on the disposal of UK residential property.

April 2012