30 Sep 2010

Income Tax

Taxable bands*

Year 2012/13£ per year% Rate
Basic rate£1 - 34,370Basic rate: 20%
Higher rate£34,371 - £150,000Higher rate: 40%
Additional rateOver £150,000Additional rate: 50%
Year 2011/12£ per year% Rate
Basic rate£1 - £35,000Basic rate: 20%
Higher rate£35,001 - £150,000Higher rate: 40%
Additional rateOver £150,000Additional rate: 50%
Year 2010/11£ per year% Rate
Basic rate£1 - £37,400Basic rate: 20%
Higher rate£37,401 - £150,000Higher rate: 40%
Additional rateOver £150,000Additional rate: 50%
Year 2009/10£ per year% Rate
Basic rate£0-£37,400
Basic rate: 20%
Higher rateOver £37,400Higher rate: 40%

*There is a 10p starting rate for savings income only. If an individual’s non savings taxable income exceeds the starting rate limit, the 10p starting rate for savings will not be available for savings income

22 July Emergency Budget

The Budget announced that, in 2011-12, the income tax personal allowance for under 65s will be increased by £1,000 in cash terms, taking it from £6,475 in 2010-11 to £7,475 in 2011-12. To ensure that the majority of higher rate taxpayers will pay the same total level of income tax and National Insurance Contributions (NICs) as previously planned, the Government will also reduce the basic rate limit for tax by £2,500, and the upper earnings and profits limits for NICs by £1,650, based on current estimates of the Retail Prices Index (RPI). Exact figures for the basic rate limit and higher rate threshold will be confirmed in the autumn.

Indexation of benefits and tax credits
The Government will use the Consumer Prices Index (CPI) for the price indexation of benefits and tax credits from April 2011. This change will also apply to public service pensions through the statutory link to the indexation of the Second State Pension. The Government is also reviewing how the CPI can be used for the indexation of taxes and duties while protecting revenues.
Income Tax Rates

 2009-102010-112011-12
Starting rate for savings10%10%10%
Basic rate:20%20%20%
Higher rate: 40%*40%40%40%
Additional rate**N/A50%50%
Basic rate on dividends (effective rate with tax credit)10% (0%)10% (0%)10% (0%)
Higher rate on dividends (effective rate with tax credit)32.5% (25%)32.5% (25%)32.5% (25%)
Additionalrate on dividends (effective rate with tax credit)N/A42.5% (36.1%)42.5% (36.1%)

*Over £37,400 for 2009-10 and 2010-11, over £34,900 for 2011-12.

**Over £150,000.

Personal and age-related allowances

£ per year (unless stated)2009-20102010-20112011-2012
Personal allowance (age under 65)£6,475£6,475£7,475
Personal allowance (age 65-74)£9,490£9,490£9,490
Personal allowance (age 75 and over)£9,640£9,640£9,640
Married couple's allowance** (age 75 and over)£6,965£6,965£6,965
Married couple's allowance** - minimum amount
£2,670
£2,670
£2,670
Income limit for age-related allowances£22,900£22,900£22,900
Blind person’s allowance£1,890£1,890£1,890
Capital gains tax annual exempt amount
Individuals etc.£9,600£10,100£10,100
Most trustees£4,800£5,050£5,050
Individual inheritance tax allowance£312,000£325,000£325,000
Pension schemes allowances
Annual Allowance£235,000£245,000£245,000
Lifetime Allowance£1,650,000£1,750,000£1,750,000

*From April 2010, the personal allowance will be gradually withdrawn for incomes over £100,000 at a rate of £1 of allowance lost for every £2 over £100,000 until it is completely removed.

** Available to people born before April 6 1935.  Tax relief for this allowance is restricted to 10%.

The capital gains tax (CGT) annual exempt amount increased in line with statutory indexation to £10,100 for the tax year 2009-10 for individuals, personal representatives of deceased persons and trustees of certain settlements for the disabled. The annual exempt amount for most other trustees is increased to £5,050.

Every husband, wife, civil partner and child has his or her own £10,100 annual exempt amount.

For capital gains above the annual exempt amount the CGT rate for 2009-10 will continue to be 18 per cent.

Working and Child Tax Credits rates

£ per year (unless stated)2009-102010-11
Working Tax Credit#colpsan##colpsan#
Basic element£1,890£1,920
Couple and lone parent element£1,860£1,920
30 hour element£775£790
Disabled worker element£2,530£2,570
Severe disability element£1,075£1,095
50+ Return to work payment (16-29 hours)£1,300£1,320
50+ Return to work payment (30+ hours)£1,935£1,965
Childcare element of the Working Tax Credit#colpsan##colpsan#
Maximum eligible cost for one child£175 per week£175 per week
Maximum eligible cost for two or more children£300 per week£300 per week
Percentage of eligible costs covered80%80%
Child Tax Credit#colpsan##colpsan#
Family element£545£545
Family element, baby addition£545£545
Child element£2,235£2,300
Disabled child element£2,670£2,715
Severely disabled child element£1,075£1,095
Income thresholds and withdrawal rates#colpsan##colpsan#
First income threshold£6,420£6,420
First withdrawal rate39%39%
Second income threshold£50,000£50,000
Second withdrawal rate6.67%6.67%
First threshold for those entitled to Child Tax Credit only£16,040£16,190
Income disregard£25,000£25,000

As announced at the 2009 Pre-Budget Report, on 6 April 2010 all elements of the Working Tax Credit (WTC), apart from the childcare element, will increase by 1.5 per cent. The limits on eligible childcare costs in the childcare element remain at £175 for one child and £300 for two or more children. The proportion of childcare costs payable through the childcare element of WTC remains at  80 per cent. The disability elements of the Child Tax Credit will increase by 1.5 per cent. The family element and baby addition  remain unchanged.   As announced in  Budget  2009, the child element of the Child Tax Credit will rise by £20 above indexation in April 2010, an increase of £65 in cash terms. As announced   at   the   2009   Pre-Budget   Report,   the   threshold   for   receipt   of   the maximum   Child   Tax   Credit   will   rise   to   £16,190   reflecting   the   income   level   at   which   a   family   in receipt of the basic and couple or lone parent elements of WTC would have their entitlement to WTC tapered to zero, and the threshold for receiving maximum family element of CTC remains at £50,000. The withdrawal rate for the family element remains at 6.67 per cent, and for the rest of tax credits at 39 per cent.

22 July Emergency Budget

The Budget announced several changes to the Child and Working Tax Credit. Summarised below are the main changes coming into effect in April 2011. Full details of all changes are available in the Budget document.
The child element of the Child Tax Credit will increase by £150 above CPI in April 2011. The baby element of the Child Tax Credit will be removed from April 2011.
In addition, there will be changes to the thresholds and withdrawal rates as set out below.

Child and Working Tax Credits rates

£ per year (unless stated)2010-112011-12
Income thresholds and withdrawal rates
First withdrawal rate39%41%
Second income threshold50,00040,000
Second withdrawal rate6.67%41%
Income disregard25,00010,000

Child Benefit and Guardian’s Allowance rates from 6 April 2008.

£ per week2009-102010-11
Eldest/Only Child£20.00 (from Jan 2009)£20.30
Other Children£13.20 (from Jan 2009)£13.40
Guardian's Allowance£13.45£14.30

As announced at the Pre-Budget Report 2009, on 12 April Child Benefit and Guardian’s Allowance will increase by 1.5 per cent.

22 July Emergency Budget

From 2011-12, both rates of Child Benefit will be frozen for three years.

Pension schemes allowances

Standard Lifetime Allowance 
Tax YearAmount (£)
2006 Ð 2007£1,500,000
2007 Ð 2008£1,600,000
2008 Ð 2009£1,650,000
2009 Ð 2010£1,750,000
2010 Ð 2011£1,800,000

Member Contributions

There is no limit on the amount that an individual can contribute to a registered pension scheme. If you are a UK resident aged under 75 you may receive tax relief on your contributions to a registered pension scheme. Tax relief is limited to relief on contributions up to the higher of 100% of your UK taxable earnings, and £3600.

Any amount of contributions paid over the annual allowance will be liable to the annual allowance charge.

Annual Allowance
Tax YearAmount (£)
2006 - 2007£215,000
2007 - 2008£225,000
2008 - 2009£235,000
2009 - 2010£245,000
2010 - 2011£255,000

Notional Earnings Cap

Before 6 April 2006 the rules of many pension schemes limited the amount of benefits that could be provided or contribution paid by reference to the permitted maximum under s590C ICTA 1988. Although section 590C ICTA 1988 was repealed on 6 April 2006 the permitted maximum can continue to apply to registered pension schemes for a period up to 5 April 2011 because of regulation 4 of The Registered Pension Schemes (Modification of the Rules of Existing Schemes) Regulations 2006 – SI 2006/364.

If section 590C had not been repealed on 6 April 2006, a Treasury order would have stated the permitted maximum figure for the tax years as follows;

Tax YearAmount (£)
2006 - 2007£108,600
2007 - 2008£112,800
2008 - 2009£117,600

Tax charges on payments from registered pension schemes

There are a number of special tax charges that apply to special payments made from registered pension schemes. These are listed below. The normal income tax rates apply to ordinary pensions payments made from pension schemes.

 Rates
Lifetime allowance charge55% - if the amount over the lifetime allowance is paid as a lump sum
25% - if the amount over the lifetime allowance is not taken as a lump sum
Annual allowance charge40%
Unauthorised payments charge40%
Unauthorised payments surcharge15%
Short service refund lump sum charge20% on first £10,800, 40% on amounts over £10,800
Special lump sum death benefits charge35%
Authorised surplus payments charge35%
Scheme sanction charge15% - 40%

State Pension and Pension Credit

As   announced   at   the   Pre-Budget   Report   2009,  on   12   April   2010   the   basic   State   Pension   will increase by 2.5 per cent, in line with the Government’s commitment to increase it by the higher of September’s Retail Prices Index or 2.5 per cent.     Pension credit means that no single pensioner need live on less than £132.60 a week in 2010-11 and no couple on less than £202.40

£ per week2009-102010-11
State pension
Category A or B basic State Pension95.2597.65
Category B basic State Pension (lower) Ð spouse or civil partnerÕs insurance57.0558.50
Category C or D - non-contributory57.0558.50
Category C (lower) - non-contributory34.1535.00
Pension Credit
Standard minimum guarantee Ð single130.00132.60
Standard minimum guarantee Ð couple198.45202.40
Savings Credit threshold Ð single96.0098.40
Savings Credit threshold Ð couple153.40157.25
Savings Credit maximum Ð single20.4020.52
Savings Credit maximum Ð couple27.0327.09

22 July Emergency Budget

The Government will uprate the basic State Pension by a triple guarantee of the highest of earnings, prices or 2.5 per cent from April 2011. The CPI will be used as the measure of prices, consistent with the Government’s decision to index all benefits and tax credits by the CPI, although the basic State Pension will increase by at least the equivalent of the Retail Prices Index (RPI) in April 2011 to ensure its value is at least as generous as under previous uprating rules. The standard minimum income guarantee in Pension Credit will increase in April 2011 by the cash rise in a full basic State Pension.

Individual Savings Accounts

As announced at Budget 2009, from 6 April 2010 the annual ISA investment limit for every adult is £10,200, up to £5,100 of which can be saved in cash.        This higher limit has applied for those aged 50 and over since October 2009.

Individual Savings Account2009-102010-11
For those aged under 50£7,200, of which up to £3,600 can be saved in cash.£10,200, of which up to £5,100 can be saved in cash.
For those aged 50 and over10,200, of which up to £5,100 can be saved in cash.10,200, of which up to £5,100 can be saved in cash.

Construction Industry

Sub-contractor/s rate of deduction at source - 2000/01 onwards
18%

Car benefits

From 6 April 2002 the charge on the benefit of a company car is based on a percentage of the list price and graduated according to CO2 emissions.

CO2 emissions (g/km)
(see note)
2005/06 to 2007/082008/09 onwards
13515%15%
14015%16%
14516%17%
15017%18%
15518%19%
16019%20%
16520%21%
17021%22%
17522%23%
18023%24%
18524%25%
19025%26%
19526%27%
20027%28%
20528%29%
21029%30%
21530%31%
22031%32%
22532%33%
23033%34%
23534%35%
24035%35%
24535%35%
25035%35%
25535%35%

The appropriate percentage arrived at from this table is subject to other adjustments for alternative fuels, though it is used unless the car falls within one of the categories for which adjustments are required.

Legislation will be introduced in Finance Bill 2008 to set the rates of company car tax charge for 2010-11 and subsequent years.

Note: The exact CO2 figure is always rounded down to the nearest 5 grams per kilometre (g/km). For example, CO2 emissions of 188g/km are treated as 185g/km.

Fuel benefit

The charge on the fuel benefit is based on a percentage of a set figure and graduated according to CO2 emissions.  For 2003/4 onwards, the set figure is £14,400.

Approved mileage rates

Approved mileage rates are statutory maximum amounts that can be paid without deducting tax and NICs. An employer can decide to pay more or less than the approved mileage rates.

2002-2003 to
2004-2005
First 10,000 business miles in the tax yearEach mile over 10,000 miles in the tax year
Cars and vans40p25p
Motor cycles24p24p
Bicycles20p20p

Tax relief for business expenditure on cars

New rules for tax relief for business expenditure on cars were announced on 1 April. These take effect from 1 April 2009 for businesses in the charge to Corporation Tax and 6 April 2009 for businesses in the charge to Income Tax. The rate at which qualifying expenditure on cars can be written down against profits will depend on the car’s CO2 emissions. Expenditure on cars with CO2 emissions exceeding 160 g/km will be allocated to the special rate capital allowances pool and attract 10% writing-down allowance (WDA). Expenditure on cars with CO2 emissions of 160g/km or less will attract 20% WDA in the main plant and machinery pool. The associated rules which disallow a proportion of car lease rental payments have also been amended in line with the new capital allowances rules.