Income tax and capital gains tax rates
Basic rate band
Higher rate band
|Rates differ for:||General||Savings||Dividend|
If taxable general income is less than £2,710 (2011/12: £2,560), savings income is taxed at a ‘starting rate’ of 10% until total taxable income exceeds that limit. This ‘starting rate band’ is part of the BRB.
Allocation of rate bands
Taxable income uses up the rate bands in the following order:
‘general income’ (employment, pensions, 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 and higher rate bands 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 higher rates.
Filing of return and payment
2012/13 personal tax return: due to be filed by 31 January 2014 (online) or 31 October 2013 (paper).
penalty for late return: £;100 (not restricted to tax due);further penalties for more than 3m/6m/12m late
2012/13 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):
Missing any payment dates leads to interest; missing the balancing payment date by 30 days will lead to a 5% surcharge. Further 5% surcharges apply when the balancing payment is 6 months late and 12 months late.
Main personal allowances
Personal income tax allowance
CGT annual exemption
Blind person’s allowance
Personal allowance (PA)
•Age 65 – 74 in the tax year
•Age 75 and over in the tax year
Married couple’s allowance (MCA)* (also for civil partners)
•Born before 6.4.1935
** If the taxpayer’s total income exceeds the income limit (extended for gift aid and personal 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%; reduced if marriage or civil partnership took place during the taxyear.
Personal allowances are reduced by £1 for every £2 of income over £100,000, so the PA is nil when income is £116,210 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 20/80 (25%) 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, which reduces tax paid under PAYE.