Income Tax
The below table shows an overview of the current tax rates.
This is not an exhaustive list and does not show restrictions, such as the married couples income level restriction.
| Tax rates | Note | 2009/10 | 2008/09 | |
| Starting rate limit* | £2,440 | £2,320 | ||
| Tax rate* | 10% | 10% | ||
| Basic rate band | £37,400 | £34,800 | ||
| Basic rate | 20% | 20% | ||
| Savings rate | 20% | 20% | ||
| Dividend ordinary rate | 10% | 10% | ||
| Higher rate - taxable income over | £37,400 | £34,800 | ||
| Higher tax rate | 40% | 40% | ||
| Dividend upper rate | 32.5% | 32.5% | ||
| * Where taxable non-savings income does not fully occupy the starting rate limit, the remainder of the limit is available for savings income at the 10% starting rate. | ||||
| Trusts | ||||
| For interest in possession trusts on all income, and other trusts on the first £1,000 of income ("standard rate band"): | ||||
| dividend ordinary rate | 4 | 10% | 10% | |
| savings income | 4 | 20% | 20% | |
| other income | 4 | 20% | 20% | |
| Income of other trusts above £1,000 is taxed at the special trust rates: | ||||
| rate applicable to trusts | 40% | 40% | ||
| dividend trust rate | 32.5% | 32.5% | ||
| Allowances that reduce taxable income | ||||
| Personal allowance (PA) | under 65 | 1 | £6,475 | £6,035 |
| 65 to 74* | 1,3 | £9,490 | £9,030 | |
| 75 and over* | 1,3 | £9,640 | £9,180 | |
| minimum | £6,475 | £6,035 | ||
| Blind person's allowance | £1,890 | £1,800 | ||
| Allowances that reduce tax | ||||
| Married couple's allowance (MCA) | ||||
| Tax reduction | 74* | 1,2,3 | n/a | £653.50 |
| 75 and over* | 1,2,3 | £696.50 | £662.50 | |
| minimum | £267 | £254 | ||
| * The age-related allowances are progressively withdrawn if income exceeds | £22,900 | £21,800 | ||
| Tax Shelters | ||||
| Enterprise Investment Scheme (EIS) up to | £500,000 | £500,000 | ||
| Venture Capital Trust (VCT) up to | £200,000 | £200,000 | ||
| Golden Handshake max. | £30,000 | £30,000 | ||
| Rent a Room - exempt on gross annual rent up to | £4,250 | £4,250 | ||
| Construction Industry Scheme deduction rate: | ||||
| Standard (registered) | 20% | 20% | ||
| Higher (not registered) | 30% | 30% | ||
Notes
- Ages are as the end of the tax year. Ages for the MCA relate to the elder of spouse or civil partner
- MCA is available only to those couples where at least one spouse or civil partner was born before 6 April 1935.
- The higher rates of personal allowances are reduced by £1 for each £2 of excess income over £22,900 (2008/09 £21,800) until the basic allowance is reached. Similar limits apply to the married couple's allowance: the loss of tax reduction is 10p for each £2 of excess income until the minimum of £267 (2008/09 £254) is reached. (For couples married before 5 December 2005, only the husband's income is taken into account. For those married on or after 5 December 2005 or in a civil partnership, only the higher earner’s income is taken into account).
- Where there are several trusts created by the same settlor, the "standard rate band" is divided equally between them, subject to a minimum band of £200 for each trust.
If you would like more information on the above rates please contact Harrisons Accountancy.