1 Hare Court : Income Tax

Income Tax Rates

Tax year

01-02

02-03

03-04

04-05

05-06

06-07

07-08

10% on first taxable

1,880

1,920

1,960

2,020

2,090

2,150

2,230

22% on next

27,520

27,980

28,540

29,380

30,310

31,150

32,370

and 40% on excess over

29,400

29,900

30,500

31,400

32,400

33,300

34,600

Income Tax Reliefs

Personal allowance

4,535

4,615

4,615

4,745

4,895

5,035

5,225

Children�s tax credit**

5,200*

5,290*

�

�

�

-

-

Baby rate**

�

10,490*

�

�

�

-

-

Age allowances

For ages 65 to 74

Personal allowance

5,990

6,100

6,610

6,830

7,090

7,280

7,550

Married couple�s allowance*

5,365*

5,465*

5,565*

5,725*

5,905*

6,065*

6,285*

For age 75 and over

Personal allowance

6,260

6,370

6,720

6,950

7,220

7,420

7,690

Married couple�s allowance*

5,435*

5,535*

5,635*

5,795*

5,975*

6,065*

6,285*

Income limit

17,600

17,900

18,300

18,900

19,500

20,100

20,900

*The tax saving for allowances asterisked above and below has been restricted to 10% from 1999-00.

** Children�s tax credit and the associated baby rate ceased to apply after 5 April 2003.

In simplified terms, income for 2007-08 (net of reliefs and allowances shown in the right hand column above) is taxable as follows �

�     Income other than from savings is taken as the first tranche of income and is taxable at the starting (10%) and basic (22%) rates as shown.

�     If the 10% starting rate band is not fully utilised by income other than from savings, then savings income other than from dividends (e.g. interest, whether received gross or net) is taxed at that rate to the limit of that band, and thereafter at 20% (the �savings rate�).

�     Dividend income is treated separately, being normally taken as the top tranche of income. UK dividends are receivable net of a 10% tax credit (i.e. one-ninth of the net dividend), which constitutes a special �Schedule F basic rate� such that, for basic rate taxpayers, no further tax is payable thereon. Tax credits are however not repayable. Special rules, beyond the scope of this Table, apply to dividends from overseas companies.

�     Income over �34,600 (after reliefs and allowances) is then subject to an �excess charge� as follows �

Higher rate (%)

Lower rates (%)

Net �excess charge� (%)

Income other than from savings

40

Starting 10/Basic 22

18

Non-dividend savings income

40

Starting 10/Savings 20

20

Dividends and tax credits generally

Special 32.5

Special 10

22.5

Working Tax Credit and Child Tax Credit and (for those over 60) Pension Credit are available to certain lower income families and lone parents, reducing as income rises: see At A Glance 2007-2008,Table 28.

For individuals aged 65 and over whose income exceeds the �income limit�, the personal age allowance reduces by half the excess until (but not beyond) the level of the ordinary personal allowance. Similar restriction applies to the married couple�s allowance (available only for spouses of whom one was born before 6 April 1935), until a minimum of �2,440* for 2007-08 is reached.

Maintenance payments are not taxable in the hands of the recipient. For the payer who (or whose former spouse) was born before 6 April 1935 tax relief is available, but for 2007-08 is limited to a maximum of �2,440* of qualifying maintenance payments falling due in the year. As with other asterisked items, the tax saving is limited to 10%. For the r�gime before 2000-01, see �Tax Relief on Maintenance� (Table 32) in the 1999-2000 edition of At A Glance.

Income within discretionary and accumulation trusts: from 2006-07 the first �1,000 of income is taxed at basic or lower rates. The excess is taxed at 40% on non-dividend income and at 32.5% on grossed-up dividends. Further tax may be payable when income is distributed, but such intricacies are beyond the scope of this Table.