You and Personal Changes

Tax rates

Income Tax and National Insurance Rates, Thresholds and Allowances

The tax rates and allowances for 2009/10 are contained in an accompanying table. Changes to the rates and allowances for 2009/10 and subsequent years that should be noted are as follows:

• For 2009/10 the Upper Earnings Limit for primary Class 1 National Insurance Contributions will be aligned with the level at which higher rate income tax is paid, at £43,875. This is the total of the basic rate limit and the personal allowance.
• For 2010/11 the personal allowance will be reduced for individuals with gross incomes before the allowance of £100,000, and further reduced for those with gross incomes above £140,000. When taxpayers are affected by this reduction, the marginal rate of tax rises from 40% to 60%
• For 2011/12, a higher rate of income tax of 45% will apply to taxable non-savings and savings income above £150,000 and a new rate of 37.5% will apply to taxable dividend income above £150,000.
• The dividend trust rate and the trust rate of tax will increase by 5% to 37.5% and 45% respectively for 2011/12.
• From 2011/12, national insurance rates will increase by 0.5% for both employees, their employers and for Class 4 contributions for the self-employed. The increased rate will also apply to Class 1A and Class 1B contributions.
• From 2011/12, the primary threshold for NICs will be aligned with the single personal allowance for income tax.

Tax rates	2009/10
Savings starting rate band to	£2,440
Savings starting tax band rate	10%
Basic rate band	£37,400
Basic tax rate	20%
Higher rate - taxable income over	£37,400
Tax of UK dividends within basic rate band	10%
Higher tax rate	40%
UK dividend rate	32.5%
Trusts:
Trust rate	40%
Schedule F trust rate	32.5%
Allowances that reduce taxable income:
Personal allowances :
Age under 65	£6,475
Age 65-74	£9,490
Age 75 and over	£9,640
Blind person's allowance	£1,890
Allowances that reduce tax:
Married couple's allowance (MCA):	£6,475
Aged less than 75 and born before 6 April 1935	£686.50
Age 75 and over - minimum amount	£267
The age-related allowances are progressively withdrawn if income exceeds	£22,900
Minimum Personal Allowance	£6,475
Minimum MCA tax reduction	£267
Non domicile charge:
Charge for adult non domiciliary applies after UK residence in 7 or more of the previous years	£30,000

Please note that these rates and allowances and notes will be fully updated immediately after the 2009 Budget.

2009/10 National Insurance

£ per week (unless stated)
Class 1:
Lower earnings limit, primary Class 1	£95
Primary threshold	£105
Upper earnings limit, primary Class 1	£844
Upper accruals point	£770
Employees' primary Class 1 rate between primary threshold and upper earnings limit	11%
Employees' primary Class 1 rate above upper earnings limit	1%
Employees' contracted-out rebate - salary related schemes	1.6%
Employers' contracted-out rebate - money purchase schemes	1.6%
Married women's reduced rate between primary threshold and upper earnings limit	4.85%
Married women's rate above upper earnings limit	1%
Employers' secondary Class 1 rate above secondary threshold	12.8%
Employers' contracted out rebate, salary-related schemes	3.7%
Employers' contracted out rebate, money-purchase schemes	1.4%
Class 2 rate	£2.40
Class 2 small earnings exception (per year)	£5,075
Special class 2 for share fishermen	£3.05
Class 3 rate	£12.05
Class 4 lower profits limit (per year)	£5,715
Class 4 upper profits limit (per year)	£43,875
Class 4 rate between lower profits limit and upper profits limit	8%
Class 4 rate above upper profits limit	1%

2009/10 working and child tax credits

Working Tax Credit

Basic element	£1,890
Couple and lone parent element	£1,860
30 hour element	£775
Disabled worker element	£2,530
50+Return to work payment (16-29 hours)	£1,300
50+ Return to work payment (30+ hours)	£1,935

Childcare element of the working tax credit

Maximum eligible cost for one child	£175 per week
Maximum eligible cost for two or more children	£300 per week
Percentage of eligible costs covered	80%
Child Tax Credit
Family element	£545
Family element, baby addition	£545
Child element	£2,235
Disabled child element	£2,670
Severely disabled child element	£1,075

Income thresholds and withdrawal rates

First income threshold	£6,420
First withdrawal rate	39%
Second income threshold	£50,000
Second withdrawal rate	6.67%
First threshold for those entitled to Child Tax Credit only	£16,040
Income disregard	£25,000

Child benefit rates (from 5 January 2009)

Eldest/only child	£20.00
Other children	£13.20
Guardian's allowance	£14.10

Individual Savings Accounts (ISA) and multilateral institutions

The list of investments that qualify for inclusion in an ISA will be extended to include bonds issued by multilateral institutions as defined by the Organisation for Economic Cooperation and Development. This provision will be effective from 16 December 2008.

Disabled company car drivers

Disabled company car drivers who drive automatics are currently able to use the CO₂ emissions figure of an equivalent manual vehicle to calculate the taxable car benefit. With effect from 6 April 2009, they will be able to use the lower list price of an equivalent manual vehicle, where this is lower than that of the automatic car.

Pension schemes: The lifetime and annual allowances

Pension scheme members are subject to a lifetime allowance for savings that are eligible for tax relief. This was set at £1.5 million in April 2006 and will rise to £1.8 million in 2010/11.

As previously announced, the annual contributions allowance on which tax relief is available was set at £215,000 in April 2006 and will rise to £255,000 in 2010/11.

However, both allowances will remain at their 2010/11 limits until 2015/16.

Property Authorised Investment Funds (Property AIFS)

With effect from 1 January 2009 changes are to be introduced that provide for a stamp duty reserve tax (SDRT) exemption for feeder funds to property AIFSs and simpler distributions to property AIF feeder funds; and clarification of the tax treatment of manufactured payments representing Property AIFS distributions. Currently tax regulations for Property AIFs require that property income and interest distributions are paid gross to other AIFSs. The measure will allow for net payment to unit trusts where this is requested. This is intended to simplify administration for specialist 'feeder funds' through which companies can invest in Property AIFS. Further the rules applying to property AIFSs do not currently specify the tax treatment of manufactured payments representing distributions. The measure introduced will clarify the treatment so that it is in line with other existing provisions for manufactured payments.

Avoidance using authorised investment funds (AIFS)

With effect from 1 January 2009 an anti-avoidance provision will be introduced that will prevent the corporate streaming provisions in the AIFSs regulations from applying at all to investors for whom an AIFS dividend is to be treated as a trading receipt. This will block attempts to circumvent the current anti-avoidance rules. It is intended that the change will mean that the only investors remaining within the scope of the current rules are general insurance companies for whom an AIFS dividend is not treated as a trading receipt.

Qualified investor schemes (QIS)

This change affects Qualified Investor Schemes and their investors and replaces a QIS tax rule that effectively limits most investors to a 10 percent share of any one fund, by a genuine diversity of ownership rule. With effect on and after 1 January 2009 this change will amend the regulations to remove the specific tax charge on substantial investors and will allow all investors in a QIS to benefit from the tax regime applying to authorised investment funds, subject to a condition that investment in the QIS will not be limited to specific individuals or companies.

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