Section 1: Charge, Main Rates, Thresholds and Allowances Etc for 2010-11
Summary
1.Section 1 imposes the income tax charge, sets the basic, higher and additional rates, sets the basic rate limit and starting rate limit for savings and sets the amounts of personal allowances for 2010-11.
Details of the Section
2.Subsection (1) imposes the income tax charge for 2010-11.
3.Subsection (2) sets the basic rate at 20 per cent, the higher rate at 40 per cent and the additional rate at 50 per cent.
4.Subsection (3) sets the amounts of the basic rate limit, the starting rate limit for savings and personal allowances in the Income Tax Act 2007 (ITA) for 2010-11 in the same amounts as for 2009-10.
Background Note
5.Income tax is an annual tax re-imposed each year by Parliament (even if the proposed rates are the same as for previous years). Parliament also sets the main rates of income tax annually.
6.Where there is an annual increase in the retail prices index (RPI) to the September preceding the relevant tax year, HM Treasury makes an “indexation order”. The indexation order sets the amounts of the basic rate limit, the starting rate limit for savings and personal allowances for the following tax year in amounts increased by the percentage increase in the RPI (any of these amounts can be over-ridden by Parliament through a provision in the Finance Bill). The RPI for the year to September 2009 decreased, so HM Treasury were not able to make an indexation order to set the amounts of the basic rate limit, the starting rate limit for savings and personal allowances for 2010-11. For 2010-11, this section sets the basic rate limit, the starting rate limit for savings, and the personal allowances in the amounts that they were for 2009-10.
7.The table below sets out the main rates and income bands for 2009-10 as they apply to taxable income and the proposed main rates and income bands for 2010-11:
| 2009-10 | 2010-11 | |
|---|---|---|
| Basic rate | £0 - £37,400 at 20% | £0 - £37,400 at 20% |
| Higher rate | Over £37,401 at 40% | £37,401 - £150,000 at 40% |
| Additional rate | Over £150,000 at 50% |
8.The table below sets out the starting rate limit for savings for 2009-10 and the proposed starting rate limit for savings for 2010-11:
| 2009-10 | 2010-11 | |
|---|---|---|
| Starting rate limit for savings | £2,440 | £2,440 |
9.The table below sets out the personal allowances for 2009-10 and the proposed personal allowances for 2010-11:
| 2009-10 | 2010-11 | |
|---|---|---|
(1) Married couple’s allowance is available to people born before 6 April 1935. It is given at a rate of 10 per cent. | ||
| Personal allowance (aged under 65) | £6,475 | £6,475 |
| Personal allowance (aged 65 – 74) | £9,490 | £9,490 |
| Personal allowance (aged 75 and over) | £9,640 | £9,640 |
| Married couple’s allowance(1) | £6,965 | £6,965 |
| Married couple’s allowance: minimum amount | £2,670 | £2,670 |
| Income limit for age-related allowances | £22,900 | £22,900 |
| Blind person’s allowance | £1,890 | £1,890 |
10.The basic rate limit, starting rate limit for savings and the personal allowances are provided for by ITA, as amended by Finance Acts 2008 and 2009.
