The Income Tax (Indexation) (No. 2) Order 2002

Explanatory Note

(This note is not part of the Order)

Section 257C(3) of the Income and Corporation Taxes Act 1988 “the Act” operates to provide that the Treasury shall by order made by statutory instrument before 6 April 2003 specify the amounts which by virtue of that section shall, unless Parliament otherwise determines, be treated as specified for the purposes of sections 257 (personal allowances), 257A (married couple’s allowances for those born before 6 April 1935), and 265 (blind person’s allowance) of the Act for the year of assessment 2003-04.

The relevant amounts for the purposes of sections 257(1), (2), (3) and (5) (basic personal allowance, age-related personal allowances and income limit for age-related personal allowances) and section 257A (married couple’s allowances) of the Act were specified for the year 2002-03 by the Income Tax (Indexation) (No. 2) Order 2001 (S.I. 2001/3773). The relevant amount for the purposes of section 265(1) (blind person’s allowance) of the Act was specified for the year 2002-03 by the Income Tax (Indexation) Order 2002 (S.I. 2002/707).

The amounts in sections 257(5), 257A(2), (3), (5) and (5A), and 265(1) of the Act are increased by this Order in accordance with the percentage increase in the retail prices index for September 2002 over that for September 2001. Certain of the amounts have been rounded up to the nearest £100 in accordance with section 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 2001 is 174.6 and for September 2002 is 177.6.

Section 28(1) of the Finance Act 2002 specifies that for the year 2003-04 the amount in section 257(1) of the Act (personal allowance) is £4,615. Section 29(1)(a) of the Finance Act 2002 specifies that for the year 2003-04 the amount in section 257(2) of the Act (personal allowance for those aged between 65 and 74) is £6,610. Section 29(1)(b) of the Finance Act 2002 specifies that for the year 2003-04 the amount in section 257(3) of the Act (personal allowance for those aged 75 or over) is the amount that would apply by virtue of section 257C(1) of the Act (the amount increased in accordance with the percentage increase in the retail prices index for September 2002 over that for September 2001 and where relevant rounding it up to the nearest £10) plus £240. The amount that would apply by virtue of section 257C(1) of the Act is £6,480 and therefore the allowance is £6,720.