The Income Tax (Indexation) Order 1995

Statutory Instruments

1995 No. 3031

INCOME TAX

The Income Tax (Indexation) Order 1995

Made

28th November 1995

The Treasury, in pursuance of sections 1(6) and 257C(3) of the Income and Corporation Taxes Act 1988(1), hereby make the following Order:

1.  This Order may be cited as the Income Tax (Indexation) Order 1995.

2.—(1) The amounts which, unless Parliament otherwise determines, will be treated by virtue of sections 1(4)(2) and 257C(1) of the Income and Corporation Taxes Act 1988 as specified for the year 1996 – 97 in sections 1(2)(3), 257 and 257A(4) of that Act are set out in paragraphs (2), (3) and (4).

(2) In subsection (2) of section 1 of the said Act (the charge to income tax)—

(a) in paragraph (aa) (lower rate limit)— £3,400;

(b) in paragraph (b) (basic rate limit)— £25,300.

(3) In section 257 of the said Act (personal allowance)—

(a) in subsection (1) (personal allowance)— £3,665;

(b) in subsection (2) (personal allowance— age 65 to 74) — £4,810;

(c) in subsection (3) (personal allowance— age 75 and over)— £4,990;

(d) in subsection (5) (income limit for age-related allowances) — £15,200.

(4) In section 257A of the said Act (married couple’s allowance) —

(a) in subsection (1) (married couple’s allowance)— £1,790;

(b) in subsection (2) (married couple’s allowance— age 65 to 74)— £3,115;

(c) in subsection (3) (married couple’s allowance— age 75 and over)— £3,155;

(d) in subsection (5) (income limit for age-related allowances) — £15,200.

Derek Conway

Simon Burns

Two of the Lords Commissioners of Her Majesty’s Treasury

28th November 1995

Explanatory Note

(This note is not part of the Order)

Sections 1(6) and 257C(3) of the Income and Corporation Taxes Act 1988 (“the Act”) operate to provide that the Treasury shall by order made by statutory instrument before 6th April 1996 specify the amounts which by virtue of those sections shall, unless Parliament otherwise determines, be treated as specified for the year 1996 – 97. These are the lower rate and basic rate limits (section 1 of the Act) and the personal and married couple’s allowances (sections 257 and 257A of the Act respectively).

This Order specifies the relevant amounts for the 1996 – 97 year of assessment.

The amount of the lower rate limit was specified for the year 1995 – 96 by section 35(2) of the Finance Act 1995 (c. 4); and the amount of the basic rate limit was specified for that year by the Income Tax (Indexation) Order 1994 (S.I. 1994/3012) (“the 1994 Order”).

For the year 1995 – 96, the relevant amounts for the purposes of subsections (1) and (5) of section 257 of the Act were specified by the 1994 Order, and those for the purposes of subsections (2) and (3) of that section by section 36 of the Finance Act 1995.

The relevant amounts for the purposes of subsections (1), (2) and (3) of section 257A of the Act were specified, for the year 1994 – 95, by section 77(2) of the Finance Act 1994 (which amended those subsections) and, for the year 1995 – 96, by section 77(9) of the 1994 Act. The relevant amount for the purposes of subsection (5) of section 257A of the Act was specified, for the year 1995 – 96, by the 1994 Order.

Following the amendments to section 1(4) and 257C(1) of the Act made by section 107(1) to (3) of the Finance Act 1993, the amounts in sections 1, 257 and 257A of the Act are increased by this Order in accordance with the percentage increase in the retail prices index for September 1995 over that for September 1994. Certain of the amounts have been rounded up to the nearest £100 in accordance with sections 1(4) and 257C(1)(a) of the Act and, in the case of the other amounts, the increases have been rounded up to the nearest £10 in accordance with section 257C(1)(b) of the Act.

The “retail prices index”is defined in section 833(2) of the Act, as amended by paragraph 5 of Schedule 2 to the Transfer of Functions (Economic Statistics) Order 1989 (S.I. 1989/992), as the “general index of retail prices (for all items) published by the Central Statistical Office of the Chancellor of the Exchequer”. The retail prices index for September 1994 is 145.0 and for September 1995 150.6 (based on January 1987 as 100) (see Table 3.1 on page T26 of the October 1995 issue (No. 504) of Economic Trends, a publication of the Government Statistical Service).

(1)

1988 c. 1. Section 1(6) was amended by section 24(2) of the Finance Act 1988 (c. 39) and by section 9(1) and (7) of the Finance Act 1992 (c. 20). Sections 257 to 257F were substituted for section 257 by section 33 of the Finance Act 1988 with effect for the year 1990 91 and subsequent years of assessment; section 257C was amended by section 17(2) of, and Part IV of Schedule 19 to, the Finance Act 1990 (c. 29) and by section 107(3) of, and Part III(10) of Schedule 23 to, the Finance Act 1993 (c. 34).

(2)

Section 1(4) was amended by section 24(2) of the Finance Act 1988, by section 9(1) and (6) of the Finance Act 1992 and by section 107(2) of the Finance Act 1993.

(3)

Section 1(2) was amended by section 24(2) of the Finance Act 1988 and by section 9(1) to (3) of the Finance Act 1992.

(4)

Sections 257 and 257A as substituted by section 33 of the Finance Act 1988 were amended by section 33 of the Finance Act 1989 (c. 26), and section 257A was further amended by section 77(2) of, and paragraph 1 of Schedule 8 to, the Finance Act 1994 (c. 9).