Income Tax
This is the most frequently encountered tax, and many people pay too much, either out of ignorance or poor planning.
We can help you ensure that you are paying the right level of tax. We can help identify ways to save tax, and ensure that your affairs are run in a tax efficient manner.
Below is a guide to Income Tax rates, thresholds and reliefs for the current and previous tax year:
| Income tax rates | 2011-2012 | 20010-2011 |
|---|---|---|
| 10% on first* |
£2,560 | £2,440 |
| 20% on first/next |
£35,000 | £37,400 |
| 40% on income over Additional Rate: 50% over |
£35,000 £150,000 |
£37,400 £150,000 |
| Dividends for basic rate taxpayers |
10% | 10% |
| Dividends for higher rate tax payers Dividends for additional rate tax payers |
32.5% 42.5% |
32.5% 42.5% |
| Trusts - Standard rate band generally |
£1,000 | £1,000 |
| Trusts - Rates applicable: Dividends Trusts - Rates applicable: Other income Pre-owned assets tax minimum taxable as income |
42.5% 50% £5,000 |
42.5% 50% £5,000 |
* From 2008-09 there is a 10 per cent starting rate for savings income only. If your non-savings income is above this limit then the 10 per cent starting rate for savings will not apply.
The rates available for dividends for the 2008-09 and 2009-10 tax years are the 10 per cent ordinary rate and the 32.5 per cent dividend upper rate. For the 2010-11 tax year, as well as these rates there is a new dividend additional rate of 42.5 per cent.
| Main income tax reliefs | 2011-2012 | 2010-2011 |
|---|---|---|
| Personal Allowance (basic) (1) Income Limit for Personal Allowance |
£7,475 £100,000 |
£6,475 £100,000 |
| Personal Allowance (age 65-74) (1) (2) |
£9,940 | £9,490 |
| Personal Allowance (age 75 & over) (1) (2) |
£10,090 | £9,640 |
| Married Couple's Allowance (where born before 06.04.35) (2) (3) (4) |
n/a | n/a |
| Married couple's allowance (age 75 & over) (2) (3) |
£7,295 | £6,965 |
| Income limit for age-related allowances | £24,000 | £22,900 |
| Blind Person's Allowance |
£1,980 | £1,890 |
(1) From the 2010-11 tax year the Personal Allowance reduces where the income is above £100,000 – by £1 for every £2 of income above the £100,000 limit. This reduction applies irrespective of age.
(2) These allowances reduce where the income is above the income limit – by £1 for every £2 of income above the limit. For the 2008-09 and 2009-10 tax years they will never be less than the basic Personal Allowance or minimum amount of Married Couple's Allowance. However, from the 2010-11 tax year the Personal Allowance for people aged 65 to 74 and 75 and over can be reduced below the basic Personal Allowance where the income is above £100,000.
(3) Tax relief for the Married Couple's Allowance is given at the rate of 10 per cent.
(4) In the 2009-10 tax year all Married Couple's Allowance claimants in this category will become 75 at some point during the year and will therefore be entitled to the higher amount of the allowance - for those aged 75 and over.
