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Income Tax

2009/10 Tax rates and allowances as announced on 24 November 2008 in the 2008 Pre Budget Report.

Tax rates Note 2008/09 2007/08
Savings starting rate band to £2,320 N/A
Savings starting tax band rate 10% N/A
Starting rate band to N/A £2,230
Starting tax rate band N/A 10%
Basic rate band 4 £34,800 £32,370
Basic tax rate 20% 22%
Income within basic rate band N/A 20%
Tax on UK dividends within starting (2007/08) and basic rate bands 10% 10%
Higher rate - taxable income over 4 £34,800 £34,600
Higher tax rate 40% 40%
UK dividend rate 32.5% 32.5%
Trusts    
Trust rate 40% 40%
Schedule F trust rate 32.5% 32.5%
Allowances that reduce taxable income    
Personal allowance (PA) under 65 1,4 £6,035 £5,225
  65 to 74 1,3 £9,030 £7,550
  75 and over 1,3 £9,180 £7,690
  Blind person's allowance   £1,800 £1,730
Allowances that reduce tax    
Married couple's allowance (MCA)      
Tax reduction 74 1,2,3 £653.50 £628.50
  75 and over 1,2,3 £662.50 £636.50
The age-related allowances are progressively withdrawn if income exceeds £21,800 £20,900
Minimum PA £6,035 £5,225
Minimum MCA tax reduction £254 £244
Non domicile charge
Charge for adult non UK domiciliary - applies after UK residence in 7 or
more of the previous tax years		 £30,000 N/A
Tax Shelters    
Enterprise Investment Scheme (EIS) up to £500,000 £400,000
Maximum amount for EIS carry back £50,000 £50,000
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 rate - registered 20% 20%
Higher rate - not registered 30% 30%

2010 and beyond

2010/11

There will be two separate income limits for the basic personal allowance. The personal allowance will be reduced where gross incomes before personal aloowances are above £100,000 and £140,000.

2011/12

A new 45% rate of income tax is introduced that will apply to taxable non-savings and savings above £150,000.

A new 37.5% rate of tax will apply to taxable dividend income above £150,000.

The dividend trust rate will increase to 37.5?% and the trust rate will be 45%.

Notes

  1. Ages are as the end of the tax year. Ages for the MCA relate to the elder of spouse or civil partner.
  2. MCA is available only to those couples where at least one spouse or civil partner was born before 6 April 1935.
  3. The higher rates of personal allowances are reduced by £1 for each £2 of excess income over £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 £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).
  4. Personal allowance increased by £600 on 13 May 2008. The higher rate band was reduced by £1,200. It was confirmed on 24 November 2008 that this would be a permanant increase.

Did you know?

That the Government expect to receive £157 billion from income tax. This represents a decrease of £2 billion when compared with the forecast on Budget Day in March 2008.