Personal Taxation 2010/11

Income tax and capital gains tax rates

2010/11

2009/10

Starting rate (savings income only)*

£2,440

£2,440

Basic rate band

37,400

37,400

Higher rate band

37,401-150,000

over 37,400

Additional rate

over 150,000

–

* The starting rate does not apply to general income; it only applies to savings income if general income less allowances is less than £2,440. This starting rate band is included in the basic rate band of £37,400.

Allocation of rate bands

Taxable income uses up the rate bands in the following order:

• ‘general income’ (employment, business profits, rent)

   

• ‘savings income’ (mainly interest)

   

• ‘dividends’ (mainly distributions from companies)

   

Extension of basic and higher rate bands

A taxpayer who pays personal (including stakeholder) pension policy premiums, or gives cash to charity under the Gift Aid scheme, increases the basic rate band by the grossed up equivalent of the payment. This means that more tax is paid at the basic rate and less is paid at the top rate.

Filing of return and payment

2010/11 personal tax return: due to be filed by 31 January 2012 (online) or 31 October 2011 (paper).

• penalty for late return: £100 (or the tax due, if less)

  2010/11 tax payable:

   

• tax on employment income paid under PAYE each month

   

• basic rate liability on savings and dividends usually settled by receiving the income net of tax paid or credited

   

• balance of tax due under self assessment (SA):

  – payments on account due 31 January 2011 and 31 July 2011, based on the 2009/10 SA income tax and Class 4 NIC

  – balance, plus any CGT, due 31 January 2012, with the first payment on account for 2011/12

  Missing any payment dates leads to interest; missing the balancing payment date by 28 days will lead to a 5% surcharge and a further 5% surcharge if not paid by following 31 July.

Main personal allowances

2010/11

2009/10

Personal income tax allowance

***£6,475

£6,475

CGT annual exemption

10,100

10,100

Blind person’s allowance

1,890

1,890

Age allowances

2010/11

2009/10

Personal allowance (PA)

• Age 65 – 74 in the tax year

£9,490

£9,490

• Age 75 and over in the tax year

9,640

9,640

• Minimum*

6,475

6,475

Married couple’s allowance (MCA)** (also for civil partners)

• Age 75 and over

6,965

6,965

• Minimum*

2,670

2,670

Income Limit*

22,900

22,900

* If the taxpayer’s total income exceeds the income limit (extended for gift aid and pension contributions), one-half of that excess is deducted from the allowances – first from the PA until the minimum is reached, then from the MCA until the minimum is reached.

** Amount depends on age of older spouse; allowed at 10%; nil if born after 5 April 1935; reduced if marriage took place during the tax year.

***Personal allowances are reduced by £1 for every £2 of income over £100,000, so the PA is nil when income is £112,950 or more.

Main personal reliefs

Rent-a-room exemption for letting out part of the taxpayer’s only or main residence: gross income of £4,250pa.

Gift aid: on a cash gift to charity, the charity can reclaim 22/78 (28.2%) of the donation from HMRC if the donor makes a declaration. The donor increases the basic rate band by the gross gift (i.e. donation x 100/80). The market value of gifts of land or quoted shares can be deducted from taxable income for full tax relief, and the charity pays no tax on the gift received. Also the “Give as you earn” scheme allows charitable gifts to be made from pre-tax pay, so PAYE is reduced.