Income Tax
| Tax rates | Note | 2008/09 | 2007/08 | |
| Starting rate band | * see below | £2,230 | ||
| Tax rate | N/A | 10% | ||
| Basic rate band | £36,000 | £32,370 | ||
| Basic rate | 20% | 22% | ||
| Savings rate | * see below | 20% | ||
| Dividend ordinary rate | 10% | 10% | ||
| Higher rate - taxable income over | £36,000 | £34,600 | ||
| Higher tax rate | 40% | 40% | ||
| Dividend upper rate | 32.5% | 32.5% | ||
| * 10% starting rate for savings income up to £2,320. Not applicable if taxable non-savings income exceeds £2,320. | ||||
| Trusts | ||||
| For interest in possession trusts on all income, and other trusts on the first £1,000 of income ("standard rate band"): | ||||
| dividend ordinary rate | 4 | 10% | 10% | |
| savings income | 4 | 20% | 20% | |
| other income | 4 | 20% | 22% | |
| Income of other trusts above £1,000 is taxed at the special trust rates: | ||||
| rate applicable to trusts | 40% | 40% | ||
| dividend trust rate | 32.5% | 32.5% | ||
| Allowances that reduce taxable income | ||||
| Personal allowance (PA) | under 65 | 1 | £5,435 | £5,225 |
| 65 to 74 | 1,3 | £9,030 | £7,550 | |
| 75 and over | 1,3 | £9,180 | £7,690 | |
| Blind person's allowance | £1,800 | £1,730 | ||
| Allowances that reduce tax | ||||
| Married couple's allowance (MCA) | ||||
| Tax reduction | 74 | 1,2,3 | £653.50 | £628.50 |
| 75 and over | 1,2,3 | £662.50 | £636.50 | |
| The age-related allowances are progressively withdrawn if income exceeds | £21,800 | £20,900 | ||
| Minimum PA | £5,435 | £5,225 | ||
| Minimum MCA tax reduction | £254 | £244 | ||
| Tax Shelters | ||||
| Enterprise Investment Scheme (EIS) up to | 5 | £500,000 | £400,000 | |
| Venture Capital Trust (VCT) up to | £200,000 | £200,000 | ||
| Golden Handshake max. | £30,000 | £30,000 | ||
| Rent a Room - exempt on gross annual rent up to | £4,250 | £4,250 | ||
| Construction Industry Scheme deduction rate: | ||||
| Standard (registered) | 20% | 20% | ||
| Higher (not registered) | 30% | 30% | ||
Notes
- Ages are as the end of the tax year. Ages for the MCA relate to the elder of spouse or civil partner
- MCA is available only to those couples where at least one spouse or civil partner was born before 6 April 1935.
- The higher rates of personal allowances are reduced by £1 for each £2 of excess income over £21,800 (2007/08 £20,900) until the basic allowance is reached. Similar limits apply to the married couple's allowance: the loss of tax reduction is 10p for each £2 of excess income until the minimum of £254 (2007/08 £244) is reached. (For couples married before 5 December 2005, only the husband's income is taken into account. For those married on or after 5 December 2005 or in a civil partnership, only the higher earner’s income is taken into account).
- Where there are several trusts created by the same settlor, the "standard rate band" is divided equally between them, subject to a minimum band of £200 for each trust.
- Start date for 2008/09 increase is subject to European Commission approval.
