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Measure Name
Date when measure came into force
50% Additional rate of tax 2010/04/06
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Generic Tax Name Personal income tax
Tax name in the national language Personal income tax
Tax name in English Personal income tax
Member State UK-United Kingdom
Tax in force since 1988/01/01
If abolished, date on which the tax ceases to apply
Business version date 2015/01/01
Version date 2015/02/17
This file was last updated on

Type of tax
Direct taxes Personal income tax
Corporate income tax
Other

Indirect taxes VAT
Excise duty (EU harmonised)
Alcoholic beverages
Energy products and electricity
Manufactured tobacco
Other

Social security contribution Employers
Employees
Other
 
Legal base

Income Tax

Income and Corporation Taxes Act 1988, as amended by subsequent Finance Acts; Income Tax (Earnings and Pensions) Act 2003, as amended by subsequent Finance Acts; Income Tax (Trading and Other Income) Act 2005, as amended by subsequent Finance Acts; Income Tax Act 2007, as amended by subsequent Finance Acts.

Income tax is reimposed and the main rates are set annually through the annual Finance Bill.

 
Who sets
The tax rate is set by




The tax base is set by




The reliefs are set by




Comments
 
Beneficiary





Comments

 
Geographical Scope

UK.

 
Taxpayers
Domestic-source income of non-residents is Taxed
Not Taxed
Comments

Employment incomes of married couples are Taxed jointly
Taxed separately
Comments


Comments

Persons resident or ordinarily resident in the United Kingdom and persons to whom income arises in the United Kingdom.

 
Tax object and basis of assessment
As general rule, taxable income under personal income tax includes























Comments

Income considered Domestic income
Worldwide income (subject to double-tax relief)
Comments

Benefits in kind
The following benefits in kind are usually (partially or fully) taxable












Comments


Comments

Object

To fund UK Government expenditure.

 

Income Tax

Total income from all sources subject to income tax including income from employment, profits from self-employment, pensions, taxable social security benefits, savings (mainly bank and building society interest), dividends, income from property less allowable deductions including personal allowances. Certain losses and necessary work expenses may be offset against income, and allowances are granted for expenditure on certain capital equipment.

The UK tax system is cumulative in the sense that total tax payable for a particular financial year depends upon total income in that year.  Thus, low income in one month can be used to offset high income in another. The PAYE system[1] achieves cumulation by crediting the taxpayer each week with 1/52 of his annual allowance, and 1/52 of the basic rate bands.  His or her income in the tax year to date and the sum of these weekly allowances and bands are then used to calculate the tax he or she should have paid to date. 

[1] The Pay As You Earn system is used to deduct income tax at source from the earnings of employees and occupational and personal pension schemes

 

Tax Credits:

  • System of Tax Credits - Child Tax Credit and Working Tax Credit - helps to support families with children and working people on low incomes. Child Tax Credit supports families with children, and some 16 to 18 year olds (those in non-advanced full-time education or on a course of approved training so long as this course in not provided by a contract of employment).
  • Relief for subscription for shares under the Enterprise Investment Scheme. Also for premiums on insurance to provide a retirement annuity, contributions to registered pension schemes and private medical insurance schemes and vocational training. Some of these allowances and reliefs are restricted to giving relief at a specific rate.
 
Deductions, Allowances, Credits, Exemptions
Deduction for professional expenses.
The deduction is:





Comments

Deductions from the tax base
The following items are usually (partially or fully) deductible

















Comments

Allowances
The basic yearly allowance for an individual amounts to: 10,000.00  EUR/National currency
The basic yearly allowance for a couple amounts to:
Additional allowance for 1st child
Additional allowance for 2nd child
Additional allowance for 3rd child
Additional allowance for additional child
Additional allowance for old age dependents
Comments

Allowances 2014-15

 

Personal Allowance

  • The personal tax allowance is GBP 10,000 for individuals born after 6 April 1948.
  • The personal tax allowance is GBP 10,500 for individuals born between 6 April 1948 and 5 April 1938.
  • The personal tax allowance is GBP 10,660 for individuals born before 6 April 1938. 

Married Couple's Allowance

  • The MCA for individuals aged 65-74 is set at GBP 8,165 and gives relief at the 10% rate.

Blind Persons Allowance

  • There are additional allowances for registered blind persons which is set at GBP 2,230.

Income Based Taper

  • The age-related allowances and married couple's allowance are subject to an income based taper, tapered down by GBP 1 for every GBP 2 of income above GBP 27,000 to a minimum of GBP 10,000 and GBP 3,140 respectively.
  • The personal allowance is also tapered down by GBP 1 for ever GBP 2 of income for individuals with total income over GBP 100,000, from GBP 10,000 of personal allowance to GBP 0 where income exceeds GBP 120,000.

*Rules allow employed people and self-employed people to make certain deductions from their earnings or profits from self-employment in specific circumstances.


Credits
The basic yearly credit for an individual amounts to: 1,940.00  EUR/National currency  or  %  of tax base
The basic yearly credit for a couple amounts to: 3,930.00  EUR/National currency  or  %  of tax base
Additional credit for 1st child 2,750.00  EUR/National currency  or  %  of tax base
Additional credit for 2nd child 2,750.00  EUR/National currency  or  %  of tax base
Additional credit for 3rd child 2,750.00  EUR/National currency  or  %  of tax base
Additional credit for additional child 2,750.00  EUR/National currency  or  %  of tax base
Additional credit for old age dependents
There are tax credits for:

















Comments

In relation to the Tax Credits figures provided above:

Family Element of Child Tax Credits: A basic payment of £545 is made to the claimant when they are responsible for one or more children.

Childcare Element of Working Tax Credits: An extra payment is available to a claimant that pays for registered or approved childcare. This amounts to 70% of their total costs, up to a maximum of £175 per week when paying for one child, and £300 per week when paying for more than one child to receive childcare.


Losses
Losses can be
Carried-forward for Indefinite
 Years
Carried-back for Indefinite
 Years
Transferred to spouse or partner
Comments

Broadly speaking, losses can be carried forward indefinitely until relieved.


Exemptions
The following income is exempted from income tax























Comments


Comments

Deductions:

Expenses incurred wholly, exclusively and necessarily in the performance of the employment. Expenses incurred wholly and exclusively for the purposes of earning trading income from self-employment are deductible in arriving at taxable trading profits.

 

Exempt income:

Among others, certain social security benefits, armed forces wound and disability pensions, war widows' pensions, income from educational scholarships in the hands of recipient. Dividends from investments in personal equity plans, interest on National Savings Certificates, and gambling winnings. Registered charities bodies are also exempt.

 

Tax Credits:

System of Tax Credits - Child Tax Credit and Working Tax Credit - helps to support families with children and working people on low incomes. Child Tax Credit supports families with children, and some 16 to 18 year olds (those in full-time education or unemployed and registered with a careers service).

Relief for subscription for shares under the Enterprise Investment Scheme. Also for premiums on insurance to provide a retirement annuity, contributions to registered pension schemes and private medical insurance schemes and vocational training. Some of these allowances and reliefs are restricted to giving relief at a specific rate.

 
Rate(s) Structure
The following personal income tax rates apply to aggregate annual income (allowances not included)
Bracket 1 From  0.00  EUR/Natcur
To  31,865.00  EUR/Natcur
Rate: 20.00 %
Bracket 2 From  31,866.00  EUR/Natcur
To  150,000.00  EUR/Natcur
Rate: 40.00 %
Bracket 3 From  150,001.00  EUR/Natcur
To   EUR/Natcur
Rate: 45.00 %
Comments

The above table is related to Earnings Only (please see below for full structure).

 

Income tax rates 2012-13 by tax band and type of income 

 

Bands of taxable income Rate Earnings (%) Savings (%) Dividends (%)
£0 - £2,880 Starting 20 10  10
£2,881 - £31,865 Basic 20 20 10
£31,865- £150,000 Higher 40 40 37.5
£150,001+ Additional 45 45

42.5

 

All taxpayers are liable on taxable income other than savings and dividend income at the basic rate of 20 per cent on the first £31,865, 40 per cent over the basic rate limit of £31,865 and 45 per cent over the higher rate limit of £150,000. Savings income is charged at 10 per cent up to the starting rate limit on the first £2,880, at 20 per cent up to £31,865, 40 per cent above £31,865 and 45 per cent above £150,000. Dividend income is charged at 10 per cent up to the basic rate limit of £31,865, 37.5 per cent above £31,865 and 42.5 per cent above £150,000.

* The 10 per cent starting rate applies to savings income only. If, after deducting your Personal Allowance from your total income liable to Income Tax, your non-savings income is above this limit then the 10 per cent starting rate for savings will not apply.


Regional taxes
Regional taxes are (rate in capital region) A lump-sum amount:
A percentage of income:
A tax surcharge:
Comments

Local/municipal taxes
Local taxes are (rate in capital city) A lump-sum amount:
A percentage of income:
A tax surcharge:
Comments

Special surcharges
There are special surcharges in the form of:
Surcharge 1 : Name:
A lump-sum amount:
A percentage of income:
A tax surcharge:
Comments

Separate taxation
Separate taxation applies to the following items: Employment income
Income from business or self-employed activities
Income from sport and entertainment activities
Benefits in kind (company car, meal cheques, etc)
Pension income
Owner-occupied immovable property
Dividends
Interests from government bonds
Interests from corporate bonds
Interests from special saving accounts
Interests from deposits
Royalties
Income from renting immovable property
Income from renting movable property
Capital gains on immovable property
Capital gains on movable property
Inheritance
Annuities from life insurance
Prizes and awards
Scholarships
Income from occasional activities
Revenues from donations and gifts
Revenues from lotteries and games activities
Comments

Withholding taxes
The tax is withheld when paid to residents on: Dividends:
Final Creditable
Interests from governments bonds:
Final Creditable
Interests from corporate bonds:
Final Creditable
Interests from special saving accounts:
Final Creditable
Interests from deposits:
Final Creditable
Comments


Comments
 
Tax due date

 
Tax collector

Income tax

Tax is assessed annually. The tax year is from 6 April to the following 5 April, and total income is computed on a current year basis, but business profits of an accounting year are treated as being those of the tax year.

Tax is assessed annually. In the case of income from employment and occupational pensions, tax is deducted at source by the employer or pension provider Pay As You Earn (PAYE) system. As far as possible PAYE deductions will match the individual's income tax liability for the tax year. Tax is deducted at source from some income from abroad paid through an agent in the United Kingdom, and from certain annual payments. Tax is deducted at source from bank and building society interest (unless the recipient has income below their personal allowances and they register to receive their income gross). Dividends are paid net of a 10% tax credit.

From 6 April 1996, under a system of self assessment, the taxpayer files a return of total income and capital gains and pays tax by reference to a fixed set of dates. Under the system of self assessment the responsibility for providing full details to establish the tax liability for the year rests with the taxpayer. This includes all sources of income, less allowable deductions, and capital gains (which are subject to capital gains tax). So that there will be a single tax bill for the year the tax payer, the deadline for paper self assessment tax returns is 31 October after the end of the tax year and for on-line returns 31 January following the end of the tax year.

 
Special features

Income Tax

Non-residents are subject to tax on income arising in the United Kingdom, with certain exemptions. There are special provisions regarding deductions for personal allowances for non-resident individuals.

In all partnerships the partnership will make a return to allocate the partnership income between the partners, and the individual partners will include those figures in their personal returns.

 
Economic function







Comments
 
Environmental taxes



Comments
 
Tax revenue
ESA95 code d51ma (d51a)

Year
Annual tax revenue (millions)
Currency
Tax revenue as % of GDP
Tax revenue as % of total tax revenue
2012 146,127.00 GBP 8.78
2011 149,103.00 GBP 9.21
2010 144,478.00 GBP 9.29
2009 137,964.00 GBP 9.29
2008 149,575.00 GBP 9.84
2007 147,371.00 GBP 9.93
2006 136,686.00 GBP 9.72
2005 127,884.00 GBP 9.61
2004 117,372.00 GBP 9.35
2003 111,529.00 GBP 9.37
2002 109,356.00 GBP 9.76
2001 108,518.00 GBP 10.17
2000 103,129.00 GBP 10.04

Comments

Cash data available at: HM Revenue and Customs receipts: http://www.hmrc.gov.uk/stats/tax_receipts/tax-receipts-and-taxpayers.pdf

 *Figures in the above table do not include national insurance contributions.