Part 2

Basic provisions
Chapter 2

Rates at which income tax is charged

Starting rate limit and basic rate limit

Indexation of the starting rate limit and the basic rate limit
21
1
This section applies if the retail prices index for the September before the start of a tax year is higher than it was for the previous September.
2
The starting rate limit for the tax year is the amount found as follows.
- Step 1 Increase the starting rate limit for the previous tax year by the same percentage as the percentage increase in the retail prices index.
- Step 2 If the result of Step 1 is a multiple of £10, it is the starting rate limit 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 the tax year.
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 retail 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.
4
Subsections (2) and (3) 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
Before the start of the tax year the Treasury must make an order replacing the amounts specified in section 20 with the amounts which, as a result of subsections (2) and (3), are the starting rate limit and the basic rate limit for the tax year.