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Treasury confirms higher rate threshold freeze for 2012/13

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Details of the personal allowances and tax rates for 2012/13 have been published on HM Treasury’s website.

Finance Bill 2012 will set the 2012/13 personal allowance at £8,105, and reduce the basic rate limit to £34,370, the Treasury announced at Budget 2011.

The personal allowance is increased by £630 for 2012/13 and there is an equivalent reduction in the basic rate limit ‘to leave the higher rate threshold unchanged’. A person aged under 65 earning more than £42,475 will pay tax at 40% on the excess over £42,475.

The decision to freeze the higher rate threshold for 2012/13 was announced by the Labour government at Pre-Budget Report 2009. George Osborne said at the June 2010 Budget that the threshold ‘will have to remain frozen to 2013/14’.

Last month the Daily Telegraph quoted Mike Warburton, Senior Tax Partner at Grant Thornton, as saying that the freeze, coupled with wage growth, ‘would create twice as many higher rate taxpayers by 2015 as there were in 1997’.