Compact Services

  2011 Budget - Personal Taxation

Income tax and capital gains tax rates

  2011/12 2010/11
Starting rate (savings income only)* £2,560 £2,440
Basic rate band £35,000 £37,400
Higher rate band £35,001 to £150,000 over £37,401 to £150,000
Additional rate on income over £150,000 £150,000

* The starting rate does not apply to general income; it only applies to savings income if general income less allowances is less than 2,560. This starting rate band is included in the basic rate band of 35,000.

Rates differ for

General Savings Dividend
Starting N/A 10% 10%
Basic 20% 20% 10%
Higher 40% 40% 32.5%
Additional 50% 50% 42.5%

Allocation of rate bands

Taxable income uses up the rate bands in the following order:

  • 'general income' (employment, 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 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 higher rate.

Filing of return and payment

2011/12 personal tax return: due to be filed by 31 January 2013 (online) or 31 October 2012 (paper)

  • penalty for late return: £100 (not restricted to tax due)

2011/12 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):
    • payments on account due 31 January 2012 and 31 July 2012, based on the 2010/11 SA income tax and Class 4 NIC
    • balance, plus any CGT, due 31 January 2013, with the first payment on account for 2012/13

Missing any payment dates leads to interest; missing the balancing payment date by 30 days will lead to a 5% surcharge and a further 5% surcharge if not paid 5 months after that.

Main personal allowances

  2011/12 2010/11
Personal income tax allowance ***£7,475 £6,475
CGT annual exemption £10,600 £10,100
Blind person's allowance £1,980 £1,890

Age allowances

  2011/12 2010/11
Personal allowance (PA)
• Age 65 - 74 in the tax year £9,940 £9,490
• Age 75 and over in the tax year £10,090 £9,640
• Minimum* £7,475 £6,475

Married couple' allowance (MCA)**(also for civil partners)
• Age 75 and over £7,295 £6,965
• Minimum* £2,800 £2,670

Income Limit*
£24,000 £22,900

* 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 or civil partnership 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 114,950 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 20/80 (25%) of the donation from HMR&C if the donor makes a declaration. The donor increases the basic rate band by the gross gift (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 "Give as you earn" scheme allows charitable gifts to be made from pre-tax pay, so PAYE is reduced.