Income tax and capital gains tax rates
Starting rate (savings income only)*
Basic rate band
Higher rate band
* 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:
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).
Main personal allowances
Personal income tax allowance
CGT annual exemption
Blind person’s allowance
Personal allowance (PA)
Married couple’s allowance (MCA)** (also for civil partners)
* 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.