Income Tax
Income Tax Allowances
The Chancellor announces the rates of allowances at the Pre-Budget Report which precedes the start of the tax year to which they relate. Generally speaking, Pre-Budget Report takes place in November or December.
| Income tax allowances | 2006-07 | 2007-08 |
|---|---|---|
| Personal allowance | £5,225 | £5,435 |
| Personal allowance for people aged 65-74 (1) | £7,550 | £9,030 |
| Personal allowance for people aged 75 and over (1) | £7,690 | £7,9180 |
| Married couple's allowance (born before 6th April 1935 but aged under 75) (1) (2) | £6,285 | £6,535 |
| Married couple's allowance - aged 75 and over (1) (2) | £6,365 | £6,625 |
| Income limit for age-related allowances | £20,900 | £21,800 |
| Minimum amount of married couple's allowance | £2,440 | £2,540 |
| Blind person's allowance | £1,730 | £1,800 |
(1) - These allowances reduce where the income is above the income limit by £1 for every £2 of income above the limit. They will never be less than the basic Personal allowance or minimum amount of Married Couple's allowance.
(2) - Tax relief for the Married Couple's allowance is given at the rate of 10 per cent.
Taxable Bands
The Chancellor announces the taxable bands and the rates of tax at the Budget Report which precedes the start of the tax year to which they relate. Generally speaking, Budget takes place in March.
| 2007-08 | £ per year | 2008-09 | £ per year |
|---|---|---|---|
| Starting rate 10% | 0 - £2,230 | ||
| Basic rate 22% | £2,231 - £34,600 | Basic rate 20%* | 0 - £36,000 |
| Higher rate 40% | over £34,600 | Basic rate 40%* | over £36,000 |
* There will be a new 10% starting rate for savings income only, with a limit of £2320. If an individual's taxable non-savings income is above this limit then the 10% savings rate will not be applicable. There are no changes to the 10% dividend ordinary rate or the 32.5% dividend upper rate.