The Income Tax (Indexation) Order 1998

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 1998 specify the amounts which by virtue of those sections shall, unless Parliament otherwise determines, be treated as specified for the year 1998–99. These are the lower rate and basic rate limits (section 1 of the Act), the personal and married couple’s allowances (sections 257 and 257A of the Act respectively) and, by virtue of the extension to section 257 of the Act by section 56(2) of the Finance Act 1997, the blind person’s allowance (section 265 of the Act).

This Order specifies the relevant amounts for the 1998–99 year of assessment.

The amount of the lower rate limit was specified for the year 1997–98 by section 54(2) of the Finance Act 1997 (c. 16). The amount of the basic rate limit for the year 1997–98 was specified by the Income Tax (Indexation) Order 1996 (S.I. 1996/2952).

For the year 1997–98, the relevant amounts for the purposes of subsections (1), (2) and (3) of section 257 of the Act were specified by section 55 of the Finance Act 1997. The relevant amounts for the purposes of sections 257(5) and 257A of the Act were specified by the Income Tax (Indexation) Order 1996.

The amount of the blind person’s allowance was specified for the year 1997–98 by section 56(1) of the Finance Act 1997.

Following the amendments to sections 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, 257A and 265 of the Act are increased by this Order in accordance with the percentage increase in the retail prices index for September 1997 over that for September 1996. 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 22 of Schedule 2 to the Transfer of Functions (Registration and Statistics) Order 1996 (S.I. 1996/273), as the “general index of retail prices (for all items) published by the Office for National Statistics”. The retail prices index for September 1996 is 153.8 and for September 1997 159.3 (based on January 1987 as 100) (see Table 3.1 on page T28 of the October 1997 issue (No. 528) of Economic Trends, a publication of the Government Statistical Service).