Finance Act 2009
Income Tax
The highest rate of Income Tax will rise to 50%, not 45% as previously announced, and will now take effect from April 2010 not April 2011. It will apply to taxable income over £150,000 a year. The tax rate on dividends for those with taxable income over £150,000 will be 42.5%.
So, there will be three rates of tax for dividends: -
- 10% for those with total taxable income below higher rate threshold (" ordinary rate")
- 32.5% for those with total taxable income between higher rate threshold and £150,000 ("upper rate")
- 42.5% for those with total taxable income exceeding £150,000 ("additional rate")
The highest rates (50% and 42.5%) will also apply to trusts.
In addition, from April 2010 personal allowances will be reduced by £1 for every £2 of adjusted net income over £100,000. For most people, adjusted net income is net income minus gross contributions to pensions and gross gift aid payments.
Tax rates and allowances for 2009/10 are as previously announced.
|
Income Tax Allowances |
2008/09 |
2009/10 |
|
Single Personal Allowance (<65) |
£6,035 |
£6,475 |
|
Single Personal Allowance (aged 65-74 in tax year) |
£9,030 |
£9,490 |
|
Single Personal Allowance (aged 75 & over in tax year) |
£9,180 |
£9,640 |
|
Income Limit for Age Related Allowances |
£21,800 |
£22,900 |
|
Married Couple’s Allowance (aged 75 or more) |
£6,625 |
£6,965 |
|
Minimum Married Couple’s Allowance |
£2,540 |
£2,670 |
|
Blind Person’s Allowance |
£1,800 |
£1,890 |
|
Income Tax Rates |
|||
|
Individuals |
|||
|
2008/09 |
2009/10 |
||
|
£0 – £34,800 |
20%* |
0-£37,400 |
20%* |
|
£34,801+ |
40% |
£37,401+ |
40% |
*There is 10% starting rate for savings income only, with a limit of £2,440 (£2,320 in 2008/09). If an individual’s taxable non-savings income is above this limit then the 10% savings rate will not be applicable.
Tax Rates For Most Trusts (2010/2011)
|
Dividends |
42.5% |
|
Other income and gains |
50% |
|
Standard rate band |
£1,000 |
Gift Aid
For three tax years 2009/10, 2009/10 and 2010/11 charities will be able to claim Gift Aid tax repayments at a rate of 22%, rather than 20%. This means that every £1 donated is increased by about 28p. From April 2011, the rate is expected to reduce to 20%.
National Insurance Contributions
From April 2011,grandparents and other family members of working age will be able to gain National Insurance credits toward the basic State Pension for caring for young children. This change could particularly help women in their 50s who often lose out on pension provision.
All 2009/10 National Insurance Contributions are as previously announced, and are summarised below:
Class 1 Employee (Not contracted-Out of State Second Pension) (S2P)
|
|
Employee |
Employer |
|
NIC standard rate |
11% |
12.8% |
|
No NIC on first |
£110 pw |
£110 pw |
|
Standard rate NIC up to |
£844 pw |
No Limit |
|
1% NIC on earnings over |
£844 pw |
N/A |
|
Certain married women |
4.85% |
As above |
Contracted-Out Rebate
Rebate on £95.01 - £770pw
|
Salary-related scheme |
1.6% |
3.7% |
|
Money-purchase scheme |
1.6% |
1.4% |
Limit/Threshold
|
|
Weekly |
Monthly |
Annual |
|
Lower earnings limit* |
£95 |
£412 |
£4,940 |
|
NICs start |
£105 |
£477 |
£5,720 |
|
Upper Accrual Point |
£770 |
£3,337 |
£40,040 |
|
Upper earnings limit* |
£844 |
£3,656 |
£43,875 |
*State pension benefits are based on earnings between the lower earnings limit and the upper accrual point.
Class 1A Employer
On car, fuel and most other taxable benefits is 12.8%
Self-employed (if earnings are over £5,075 pa)
|
Class 2 (Flat rate) |
£2.40pw/£124.80pa |
|
Class 4 (On profits) £5,715 - £43,875 pa Over £43,875 pa |
8% 1% |
|
Voluntary Class 3 (Flat Rate) |
£12.05 pw/£626.60 pa |