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Income tax and capital gains tax rates
| |
2003/04 |
2002/03 |
| Starting rate on first |
£1,960 |
£1,920 |
| Basic rate on next |
28,540 |
27,980 |
| Higher rate on taxable income over |
30,500 |
29,900 |
Rates differ for General Savings Dividend
| Starting |
10% |
10% |
10% |
| Basic |
22% |
20% |
10% |
| Higher |
40% |
40% |
32.5% |
Allocation of rate bands
Taxable income uses up the rate bands in the following order:
- 'general income' (employment, business, rent)
- 'savings income' (mainly interest)
- 'dividends' (mainly distributions from companies)
Capital gains (after annual exemption and taper relief, see Personal Taxation and Capital Gains Tax) are added
to the total income as the 'top slice' and taxed at the rates applicable to savings income (10%, 20% or 40%).
Extension of basic rate band
A taxpayer who pays personal (including stakeholder) pension policy premiums, or cash gifts to charity, 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
2003/04 personal tax return: due to be filed by 31 January 2005
- penalty for late return: £100 (or the tax due, if less)
2003/04 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 2004 and 31 July 2004, based on the 2002/03 SA income tax and Class 4 NIC
- balance, plus any CGT, due 31 January 2005, with the first payment on account for 2004/05
Missing any payment dates leads to interest; missing the balancing payment date by 28 days will lead to a 5% surcharge.
Main personal allowances
| |
2003/04 |
2002/03 |
| Personal income tax allowance |
£4,615 |
£4,615 |
| CGT annual exemption |
7,900 |
7,700 |
| Children's tax credit* |
- |
**5,290 |
| Blind person's allowance |
1,510 |
1,480 |
* Allowed at 10% only. Reduced by £2 for every £3 by which the parent or partner's income exceeds the
higher rate threshold (ie nil if £7,935 is taxed at higher rates in 2002/03)
** £10,490 if a child was born in 2002/03 (reduced to nil when income of £15,735 is taxed at higher rates)
Age allowances
| |
2003/04 |
2002/03 |
| Personal allowance (PA) |
|
|
| * Age 65 - 74 |
£6,610 |
£6,100 |
| * Age 75 and over |
£6,720 |
£6,370 |
| * Minimum* |
£4,615 |
£4,615 |
| Married couple' allowance (MCA)** |
|
|
| * Age 65 - 74 |
£5,565 |
£5,465 |
| * Age 75 and over |
£5,635 |
£5,535 |
| * Minimum* |
£2,150 |
£2,110 |
| Income Limit |
£18,300 |
£17,900 |
* 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.
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 the Inland Revenue if
the donor makes a declaration. The donor increases the basic rate band by the gross gift (100/78). 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.
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