Part 2Basic provisions
Chapter 2Rates at which income tax is charged
The rates
6F1The ... basic rateF29, higher rate and additional rate
1
The main rates at which income tax is charged are—
F6a
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b
the basic rate, F35...
c
the higher rate F36, and
d
the additional rate.
2
F472A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F472B
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F472C
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
For other rates at which income tax is charged see—
F103za
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F105zc
section 6C (default basic, higher and additional rates),
F106aa
section 7A (savings basic, higher and additional rates),
b
c
section 9 (trust rate and dividend trust rate).
F1044
See also section 80C of the Scotland Act 1998 which makes provision for the purposes of section 11A (income charged at Scottish rates).
6AF45The Scottish basic, higher and additional rates
1
The Scottish basic rate, the Scottish higher rate and the Scottish additional rate for a tax year are calculated as follows.
Step 1 Take the basic rate, higher rate or additional rate.
Step 2 Deduct 10 percentage points.
Step 3 Add the Scottish rate (if any) set by the Scottish Parliament for that year.
2
For provision about the setting of the Scottish rate, see Chapter 2 of Part 4A of the Scotland Act 1998.
7The starting rate for savings F70and savings nil rate
F721
The starting rate for savings is 0%.
F622
The savings nil rate is 0%.
8The F71dividend nil rate, dividend ordinary rateF30, dividend upper rate and dividend additional rate
F63A1
The dividend nil rate is 0%.
1
The dividend ordinary rate is F657.5%.
2
The dividend upper rate is 32.5%.
F393
The dividend additional rate is F6438.1%.
9The trust rate and dividend trust rate
1
The trust rate is F4345%.
2
The dividend trust rate is F6638.1%.
Income charged at particular rates
9AF74Overview of sections 10 to 15
The general effect of sections 10 to 15 is outlined in the following table—
Type of taxpayer | Rates payable on savings income | Rates payable on most dividend income | Rates payable on other income |
|---|---|---|---|
UK resident individual who is neither a Scottish taxpayer nor a Welsh taxpayer | Savings rates | Dividend rates | Main rates |
Scottish taxpayer | Savings rates | Dividend rates | Scottish rates |
Welsh taxpayer | Savings rates | Dividend rates | Main rates while section 11B is not in force; Welsh rates if that section is in force |
Non-UK resident individual | Savings rates | Dividend rates | Default rates |
Non-individual, except that some trustees in some circumstances are subject instead to the trust rate or the dividend trust rate | Default basic rate | Dividend ordinary rate | Default basic rate |
Note: the table does not address the effect of some exceptions referred to in sections 10 to 15.
10Income charged at the F2... basic F27, higher and additional rates: individuals
F91
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F102
Income tax on an individual's income up to the basic rate limit is charged at the basic rate F75....
3
Income tax is charged at the higher rate on an individual's income above the basic rate limit F31and up to the higher rate limit.
F323A
Income tax is charged at the additional rate on an individual's income above the higher rate limit.
F493B
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F493C
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
This section is subject to—
F11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F77section 11C (income charged at the default basic, higher and additional rates: non-UK resident individuals),
section 11D (savings income charged at the savings basic, higher and additional rates: individuals),
section 12 (savings income charged at the starting rate for savings),
F67section 12A (savings income charged at the savings nil rate),
section 13 (income charged at the dividend ordinary and dividend upper rates: individuals), and
any other provisions of the Income Tax Acts which provide for income of an individual to be charged at different rates of income tax in some circumstances.
5
The basic rate limit is F55£31,785.
F335A
The higher rate limit is £150,000.
F126
The basic rate limit F34and higher rate limit are increased in some circumstances: see—
a
section 414(2) (gift aid relief), and
b
section 192(4) of FA 2004 (relief for pension contributions).
7
See section 21 for indexation of the basic rate limit.
11Income charged at the F78default basic rate: non-individuals
1
Income tax is charged at the F79default basic rate on the income of persons other than individuals.
2
This section is subject to—
F13...
section 14 (income charged at the dividend ordinary rate: other persons),
Chapters 3 to 6 of Part 9 (which provide for some income of trustees to be charged at the dividend trust rate or at the trust rate), and
any other provisions of the Income Tax Acts which provide for income of persons other than individuals to be charged at different rates of income tax in some circumstances.
11AF46Income charged at the F83Scottish rates
F801A
Income tax is charged at Scottish rates on the non-savings income of a Scottish taxpayer.
4
For the purposes of this section, “non-savings income” means income which is not savings income.
5
This section is subject to—
section 13 (income charged at the dividend ordinary, upper and additional rates: individuals), and
any provisions of the Income Tax Acts (apart from section 10) which provide for income of an individual to be charged at different rates of income tax in some circumstances.
6
Section 16 has effect for determining F81which part of a Scottish taxpayer's income consists of savings income.
11CF82Income charged at the default basic, higher and additional rates: non-UK resident individuals
1
Income tax on a non-UK resident individual's income up to the basic rate limit is charged at the default basic rate.
2
Income tax is charged at the default higher rate on a non-UK resident individual's income above the basic rate limit and up to the higher rate limit.
3
Income tax is charged at the default additional rate on a non-UK resident individual's income above the higher rate limit.
4
Subsections (1) to (3) are subject to—
section 11D (savings income charged at the savings basic, higher and additional rates),
section 12 (savings income charged at the starting rate for savings),
section 12A (savings income charged at the savings nil rate),
section 13 (income charged at the dividend ordinary, upper and additional rates: individuals), and
any other provisions of the Income Tax Acts (apart from section 10) which provide for income to be charged at different rates of income tax in some circumstances.
11DIncome charged at the savings basic, higher and additional rates
1
Income tax is charged at the savings basic rate on an individual's income which—
a
is saving income, and
b
would otherwise be charged at the basic rate or the default basic rate.
2
Income tax is charged at the savings higher rate on an individual's income which—
a
is savings income, and
b
would otherwise be charged at the higher rate or the default higher rate.
3
Income tax is charged at the savings additional rate on an individual's income which—
a
is savings income, and
b
would otherwise be charged at the additional rate or the default additional rate.
4
Subsections (1) to (3)—
a
have effect after sections 12 and 12A have been applied (so that any reference in subsections (1) to (3) to income which would otherwise be charged at a particular rate does not include income charged at the starting rate for savings or at the savings nil rate), and
b
are subject to any other provisions of the Income Tax Acts (apart from sections 10 and 11C) which provide for income to be charged at different rates of income tax in some circumstances.
5
Section 16 has effect for determining the extent to which an individual's savings income above the starting rate limit for savings would otherwise be charged at the basic, higher or additional rate or the default basic, default higher or default additional rate.
6
In relation to an individual who is a Scottish taxpayer, references in this section to income which would otherwise be charged at a particular rate are to be read as references to income that would, if the individual were not a Scottish taxpayer (but were UK resident), be charged at that rate (and subsection (5) is to be read accordingly).
12F5Income charged at the starting rate for savings
1
Income tax is charged at the starting rate for savings F84... on so much of an individual's income up to the starting rate limit for savings F85as—
a
is savings income, and
b
would otherwise be charged at the basic rate or the default basic rate.
2
This is subject to any provisions of the Income Tax Acts (apart from section 10) which provide for income of an individual to be charged at different rates of income tax in some circumstances.
3
The starting rate limit for savings is F73£5000.
4
See section 21 for indexation of the starting rate limit for savings.
5
Section 16 has effect for determining the extent to which a person's income up to the starting rate limit for savings consists of savings income.
12AF58Savings income charged at the savings nil rate
1
This section applies in relation to an individual if—
a
the amount of the individual's Step 3 income is greater than £L, where £L is the amount of the starting rate limit for savings, and
b
when the individual's Step 3 income is split into two parts—
i
one (“the individual's income up to the starting rate for savings”) consisting of the lowest £L of the individual's Step 3 income, and
ii
the other (“the individual's income above the starting rate limit for savings”) consisting of the rest of the individual's Step 3 income,
some or all of the individual's income above the starting rate limit for savings consists of savings income (whether or not some or all of the individual's income up to the starting rate limit for savings consists of savings income).
2
In this section—
£A is the amount of the individual's savings allowance (see section 12B),
“the excess” is so much of the individual's income above the starting rate limit for savings as consists of savings income, and
£X is the amount of the excess.
3
If £X is less than or equal to £A, income tax is charged at the savings nil rate (rather than the basic, higher or additional rate F86or the default basic, default higher or default additional rate ) on the excess.
4
If £X is more than £A, income tax is charged at the savings nil rate (rather than the basic, higher or additional rate F87or the default basic, default higher or default additional rate ) on the lowest £A of the excess.
5
Subsections (3) and (4) are subject to any provisions of the Income Tax Acts (apart from F88sections 10 and 11C) which provide for income to be charged at different rates of income tax in some circumstances.
6
Section 16 has effect for determining the extent to which the individual's income above the starting rate limit for savings consists of savings income.
7
For the purposes of this section, an individual's “Step 3 income” is the individual's net income less allowances deducted at Step 3 of the calculation in section 23.
12BIndividual's entitlement to a savings allowance
1
Subsections (2) to (4) determine the amount of an individual's savings allowance for a tax year.
2
If any of the individual's income for the year is additional-rate income, the individual's savings allowance for the year is nil.
3
If—
a
any of the individual's income for the year is higher-rate income, and
b
none of the individual's income for the year is additional-rate income,
the individual's savings allowance for the year is £500.
4
If none of the individual's income for the year is higher-rate income, the individual's savings allowance for the year is £1,000.
5
The Treasury may by regulations substitute a different amount for the amount for the time being specified in subsection (2), (3) or (4); and regulations under this subsection that have effect for a tax year may be made at any time before the end of that tax year.
6
If regulations under subsection (5) reduce any amount, the regulations may not be made unless a draft of the instrument containing them (whether alone or together with regulations under subsection (5) which increase any amount) has been laid before, and approved by a resolution of, the House of Commons.
7
Section 1014(4) (negative procedure) does not apply to regulations under subsection (5) which increase any amount if—
a
the instrument containing them also contains regulations under subsection (5) which reduce any amount, and
b
a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.
8
For the purposes of this section—
a
each of the following is “additional-rate income”—
i
income on which income tax is charged at the additional rate F89, default additional rate or dividend additional rate,
ii
income on which income tax would be charged at the additional rate F90, or default additional rate, but for section 12A (income charged at savings nil rate),
iii
income on which income tax would be charged at the dividend additional rate but for section 13A (income charged at dividend nil rate), and
iv
income of an individual who is a Scottish taxpayer or Welsh taxpayer which would, if the individual were not a Scottish taxpayer or Welsh taxpayer (as the case may be), be income on which income tax is charged at the additional rate F91or default additional rate, and
b
each of the following is “higher-rate income”—
i
income on which income tax is charged at the higher rate F92, default higher rate or dividend upper rate,
ii
income on which income tax would be charged at the higher rate F93, or default higher rate, but for section 12A (income charged at savings nil rate),
iii
income on which income tax would be charged at the dividend upper rate but for section 13A (income charged at dividend nil rate), and
iv
income of an individual who is a Scottish taxpayer or Welsh taxpayer which would, if the individual were not a Scottish taxpayer or Welsh taxpayer (as the case may be), be income on which income tax is charged at the higher rate F94or default higher rate.
13Income charged at the dividend ordinaryF28, dividend upper and dividend additional rates: individuals
1
Income tax is charged at the dividend ordinary rate on an individual's income which—
a
is dividend income,
c
is not relevant foreign income charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis).
2
Income tax is charged at the dividend upper rate on an individual's income which—
a
is dividend income, F15...
c
is not relevant foreign income charged in accordance with section 832 of ITTOIA 2005.
F402A
Income tax is charged at the dividend additional rate on an individual's income which—
a
is dividend income,
b
would otherwise be charged at the additional rate, F102... and
c
is not relevant foreign income charged in accordance with section 832 of ITTOIA 2005.
3
4
F995
In relation to an individual who is a Scottish taxpayer, references in this section to income that would otherwise be charged at a particular rate are to be read as references to income that would, if the individual were not a Scottish taxpayer, be charged at that rate (and subsection (4) is to be read accordingly).
13AF59Income charged at the dividend nil rate
1
Subsection (2) applies if, ignoring this section, at least some of an individual's income would be charged to income tax at the dividend ordinary rate, the dividend upper rate or the dividend additional rate.
2
Income tax is charged at the dividend nil rate (rather than the dividend ordinary rate, dividend upper rate or dividend additional rate) on one or more amounts of the individual's income as follows—
Step 1 Identify the amount (“D”) of the individual's income which would, ignoring this section, be charged at the dividend ordinary rate.Rule 1A: If D is more than £5,000, the first £5,000 of D is charged at the dividend nil rate (rather than the dividend ordinary rate), and is the only amount charged at the dividend nil rate.Rule 1B: If D is equal to £5,000, D is charged at the dividend nil rate (rather than the dividend ordinary rate), and is the only amount charged at the dividend nil rate.Rule 1C: If D is less than £5,000 but more than nil, D is charged at the dividend nil rate (rather than the dividend ordinary rate).
Step 2 If D is less than £5,000, identify the amount (“U”) of the individual's income which would, ignoring this section, be charged at the dividend upper rate.Rule 2A: If the total of D and U is more than £5,000—
- a
the first £M of U is charged at the dividend nil rate (rather than the dividend upper rate), where £M is the difference between £5,000 and D, and
- b
the amounts charged under this Rule and Rule 1C are the only amounts charged at the dividend nil rate.
Rule 2B: If the total of D and U is equal to £5,000, U is charged at the dividend nil rate (rather than the dividend upper rate), and the amounts charged under this Rule and Rule 1C are the only amounts charged at the dividend nil rate.Rule 2C: If the total of D and U is less than £5,000 but more than nil, U is charged at the dividend nil rate (rather than the dividend upper rate).
- a
Step 3 If the total of D and U is less than £5,000, identify the amount (“A”) of the individual's income which would, ignoring this section, be charged at the dividend additional rate.Rule 3A: If the total of D, U and A is more than £5,000, the first £X of A is charged at the dividend nil rate (rather than the dividend additional rate), where £X is the difference between—
£5,000, and
the total of D and U,
and the amounts charged under this Rule, and Rules 1C and 2C, are the amounts charged at the dividend nil rate.Rule 3B: If the total of D, U and A is less than or equal to £5,000, A is charged at the dividend nil rate (rather than the dividend additional rate), and the amounts charged under this Rule, and Rules 1C and 2C, are the amounts charged at the dividend nil rate.
14Income charged at the dividend ordinary rate: other persons
1
Income tax is charged at the dividend ordinary rate on the income of persons other than individuals which—
a
is dividend income,
b
would otherwise be charged at the basic rate, and
c
is not relevant foreign income charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis).
2
This is subject to—
Chapters 3 to 6 of Part 9 (which provide for some income of trustees to be charged at the dividend trust rate or at the trust rate),
F44... and
any other provisions of the Income Tax Acts (apart from section 11) which provide for income of persons other than individuals to be charged at different rates of income tax in some circumstances.
15Income charged at the trust rate and the dividend trust rate
For the circumstances in which income tax is charged at the trust rate and the dividend trust rate, see Chapters 3 to 6 of Part 9.
16Savings and dividend income to be treated as highest part of total income
1
This section has effect for determiningF18—
F95za
which part of a Scottish taxpayer's income consists of savings income,
a
the extent to which a person's income up to the starting rate limit for savings consists of savings income,
F68aa
the extent to which a person's income above the starting rate limit for savings consists of savings income,
F96ab
the rate at which income tax would be charged on a person's savings income above the starting rate limit for savings apart from sections 11D and 12A, and
b
the rate at which income tax would be charged on a person's dividend income apart from section 13.
2
It also has effect for all other income tax purposes except for the purposes of—
a
section 491 (special rates not to apply to first slice of trustees' trust rate income), and
b
sections 535 to 537 of ITTOIA 2005 (gains from contracts for life insurance etc: top slicing relief).
3
If a person has savings income but no dividend income, the savings income is treated as the highest part of the person's total income.
4
If a person has dividend income but no savings income, the dividend income is treated as the highest part of the person's total income.
5
If a person has both savings income and dividend income—
a
the savings income and dividend income are together treated as the highest part of the person's total income, and
b
the dividend income is treated as the higher part of that part of the person's total income.
6
See section 1012 for the relationship between—
a
the rules in this section, and
b
other rules requiring particular income to be treated as the highest part of a person's total income.
7
References in this section to dividend income do not include dividend income which is relevant foreign income charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis).
17Repayment: tax paid at F56greater rate instead of F3starting rate for savingsF57or savings nil rate
1
F691A
This section also applies if income tax at a rate greater than the savings nil rate has been paid on income on which income tax is chargeable at the savings nil rate.
2
If a claim is made, any necessary repayment of tax must be made.
C218Meaning of “savings income”
1
This section applies for the purposes of the Income Tax Acts.
2
“Savings income” is income—
a
which is within subsection (3) or (4), and
b
which is not relevant foreign income charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis).
3
Income is within this subsection if it is—
a
income chargeable under Chapter 2 of Part 4 of ITTOIA 2005 (interest),
b
income chargeable under Chapter 7 of Part 4 of ITTOIA 2005 (purchased life annuity payments), other than income from annuities specified in section 718(2) of that Act (annuities purchased from certain life assurance premium payments or under wills etc),
c
income chargeable under Chapter 8 of Part 4 of ITTOIA 2005 (profits from deeply discounted securities), or
d
income chargeable under Chapter 2 of Part 12 of this Act (accrued income profits).
4
Income is within this subsection if—
a
it is chargeable under Chapter 9 of Part 4 of ITTOIA 2005 (gains from contracts for life insurance etc), and
b
an individual is, or personal representatives are, liable for income tax on it (under section 465 or 466 of that Act).
19Meaning of “dividend income”
1
This section applies for the purposes of the Income Tax Acts.
2
“Dividend income” is income which is—
a
chargeable under Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc from UK resident companies),
b
chargeable under Chapter 4 of that Part (dividends from non-UK resident companies),
c
chargeable under Chapter 5 of that Part (stock dividends from UK resident companies),
d
chargeable under Chapter 6 of that Part (release of loan to participator in close company), or
e
a relevant foreign distribution chargeable under Chapter 8 of Part 5 of ITTOIA 2005 (income not otherwise charged).
3
In subsection (2) “relevant foreign distribution” means a distribution of a non-UK resident company which—
a
is not chargeable under Chapter 4 of Part 4 of ITTOIA 2005, but
b
would be chargeable under Chapter 3 of that Part if the company were UK resident.
Starting rate limit and basic rate limit
F2020The starting rate limit and the basic rate limit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C1C3C4C5C6C7C8C9C1021Indexation of the F4basic rate limit and starting rate limit for savings
1
This section applies if the F53consumer prices index for the September before the start of a tax year is higher than it was for the previous September.
F212
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
The basic rate limit for the tax year is the amount found as follows.
Step 1
Increase the basic rate limit for the previous tax year by the same percentage as the percentage increase in the F54consumer prices index.
Step 2
If the result of Step 1 is a multiple of £100, it is the basic rate limit for the tax year.
If the result of Step 1 is not a multiple of £100, round it up to the nearest amount which is a multiple of £100.
That amount is the basic rate limit for the tax year.
F223A
The starting rate limit for savings for the tax year is the amount found as follows.
Step 1
Increase the starting rate limit for savings for the previous tax year by the same percentage as the percentage increase in the F52consumer prices index.
Step 2
If the result of Step 1 is a multiple of £10, it is the starting rate limit for savings for the tax year.
If the result of Step 1 is not a multiple of £10, round it up to the nearest amount which is a multiple of £10.
That amount is the starting rate limit for savings for the tax year.
4
Subsections F23(3) and (3A) do not require a change to be made in the amounts deductible or repayable under PAYE regulations during the period beginning on 6 April and ending on 17 May in the tax year.
5
F516
In this section “consumer prices index” means the all items consumer prices index published by the Statistics Board.