Personal Taxation
| Income Tax Rates |
| |
2008/09 |
2007/08 |
| Starting rate limit for savings |
£2,320 |
N/A |
| Starting rate band to |
N/A |
£2,230 |
| Starting savings rate |
10% |
N/A |
| Tax rate |
N/A |
10% |
| Basic rate band |
£36,000 |
£32,370 |
| Non-savings rate |
20% |
22% |
| Savings rate |
20% |
20% |
| UK dividend rate |
10% |
10% |
| Higher rate - income over |
£36,000 |
£34,600 |
| Tax rate excluding UK dividends |
40% |
40% |
| UK dividend rate |
32.5% |
32.5% |
| Personal Allowances |
| Ages are as at the end of the tax year |
| Allowances that reduce taxable income |
£ |
£ |
| Personal allowance |
under 65 |
5,435 |
5,225 |
| |
65 to 74 |
9,030 |
7,550 |
| |
75 and over |
9,180 |
7,690 |
| Allowances that reduce tax |
| Married couple's allowance (MCA) |
| Age of elder spouse |
74 |
653.50 |
628.50 |
| |
75 and over |
662.50 |
636.50 |
| |
minimum |
254.00 |
244.00 |
Starting rate removed
As announced in the 2007 Budget the 10 pence starting rate is removed for earned income but continues to be available for savings income
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Age-related allowances
The age-related income tax allowances for those aged 65 and over rise by £1,180 above indexation. By April 2011 the age-related allowances for those aged 75 and over will increase to £10,000.
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Self assessment payments on account
As announced in the pre-Budget Report, the payment on account threshold for income tax self-assessment will double from £500 to £1,000 from 6 April 2009.
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Venture capital schemes
It is intended that the amount invested on which an investor can claim Enterprise Investment Scheme (EIS) income tax relief in any one year will be increased from £400,000 to £500,000. However, this measure cannot take effect until approval is obtained from the European Commission. From 6 April 2008 companies whose trade consists of shipbuilding, coal and steel production will no longer qualify for the EIS, the Corporate Venturing Scheme or the Venture Capital Trust Scheme.
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Enterprise management incentives (EMI)
In respect of options granted on or after 6 April 2008 the individual emloyee limit on grants of EMI qualifying options increases from £100,000 to £120,000. However, the companies that qualify for EMIs have been restricted. Companies with 250 or more employees and those involved in ship building, coal and steel production will no longer qualify for EMI from the date that the Finance Bill 2008 receives Royal Assent.
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Employment related securities: deductible amounts.
Legislation will be introduced to ensure that exempt income can not be included in 'amounts that constitute earnings'. Consequently exempt income will not reduce the amount counting as employment income, reduce chargeable gains and increase the amount available for corporation tax relief. This anti avoidance measure commences on 12 March 2008.
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Taxation of personal dividends
UK resident individuals and non-resident Commonwealth and European Economic Association (EEA) nationals in receipt of dividends from UK resident companies are entitled under current law to a non-payable dividend tax credit equal to one ninth of the dividend. From 6 April 2008, UK resident individuals and UK and EEA nationals who have less than a 10% shareholding in non-UK resident companies will also be entitled to a non-payable tax credit. A previously announced restriction relating to the value of dividends received from non-UK resident companies will not now be introduced.
The Finance Act 2009 will extend the entitlement to the tax credit where the individual owns more than 10% of the distributing non-resident company, provided that the source country levies a tax on profits similar to corporation tax.
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Inheriting tax-relieved pensions savings
It was confirmed that pensions savings diverted to an inheritance using scheme pensions and lifetime annuities are going to be subject to an unauthorised payment charge and inheritance tax (IHT) if appropriate.
IHT protection to UK tax relieved pension savings in overseas pension schemes will be restored.
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Child trust funds (CTFs)
Applications for CTF accounts by telephone and the internet are to be facilitated by removing the requirement for the parent to produce the CTF voucher to the provider or distributor.
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Double tax relief: income tax
For income arising on or after 6 April 2008 and for foreign tax paid on or after 6 April 2008, the credit for any foreign tax paid on trade or professional earnings is to be restricted to the UK income tax due in respect of the same earnings.
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Postponement of plans re income shifting
After HM Revenue & Customs lost the landmark case of Arctic Systems following a ruling by the House of Lords, the Government announced their intention to legislate to prevent individuals arranging their affairs to gain a tax advantage by shifting part of their income to another person who is subject to a lower rate of tax ('income shifting').
Draft legislation was published in December, which many people think is unworkable. An early Day Motion was signed by 174 MP's urged the Government to reconsider its proposals.
The Government has not backed down. It has announced it now intends to introduce legislation through Finance Bill 2009, and whilst it has said that the legislation will not be backdated to 6 April 2008, it could become effective from some later date such as the date of the Pre-Budget Report.
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