Rates and Allowances - Income Tax

Income Tax Allowances

The Chancellor announces the rates of allowances at the Pre-Budget Report which precedes the start of the tax year to which they relate. Generally speaking, Pre-Budget Report takes place in November or December.

Income Tax Allowances table
Income tax allowances	2006-07 (£)	2007-08 (£)
Personal allowance	5,035	5,225
Personal allowance for people aged 65-74 (1)	7,280	7,550
Personal allowance for people aged 75 and over (1)	7,420	7,690
Married couple's allowance (born before 6th April 1935 but aged under 75) (1) (2)	6,065	6,285
Married couple's allowance - aged 75 and over (1) (2)	6,135	6,365
Income limit for age-related allowances	20,100	20,900
Minimum amount of married couple's allowance	2,350	2,440
Blind person's allowance	1,660	1,730

(1) - These allowances reduce where the income is above the income limit by £1 for every £2 of income above the limit. They will never be less than the basic Personal allowance or minimum amount of Married Couple’s allowance.
(2) - Tax relief for the Married Couple's allowance is given at the rate of 10 per cent.

Taxable Bands

The Chancellor announces the taxable bands and the rates of tax at the Budget Report which precedes the start of the tax year to which they relate. Generally speaking, Budget takes place in March.

Taxable Bands table
Taxable Bands Allowances	2006-07 (£)	2007-08 (£)
Starting rate 10%	0 - 2,150	0 - 2,230
Basic rate 22%	2,151 - 33,300	2,231 - 34,600
Higher rate 40%	over 33,300	over 34,600

National Insurance Contributions

National Insurance - Rates and Allowances
£ per week	2006-07	2007-08
Lower earnings limit, primary Class 1	£84	£87
Upper earnings limit, primary Class 1	£645	£670
Primary threshold	£97	£100
Secondary threshold	£97	£100
Employees’ primary Class 1 rate between primary threshold and upper earnings limit	11%	11%
Employees’ primary Class 1 rate above upper earnings limit	1%	1%
Employees’ contracted-out rebate	1.6%	1.6%
Married women’s reduced rate between primary threshold and upper earnings limit	4.85%	4.85%
Married women’s rate above upper earnings limit	1%	1%
Employers’ secondary Class 1 rate above secondary threshold	12.8%	12.8%
Employers’ contracted-out rebate, salary-related schemes	3.5%	3.7%
Employers’ contracted-out rebate, money-purchase schemes	1%	1.4%
Class 2 rate	£2.10	£2.20
Class 2 small earnings exception	£4,465 per year	£4,635 per year
Special Class 2 rate for share fishermen	£2.75	£2.85
Special Class 2 rate for volunteer development workers	£4.20	£4.35
Class 3 rate	£7.55	£7.80
Class 4 lower profits limit	£5, 035 per year	£5, 225 per year
Class 4 upper profits limit	£33, 540 per year	£34, 840 per year
Class 4 rate between lower profits limit and upper profits limit	8%	8%
Class 4 rate above upper profits limit	1%	1%

Pension Schemes earnings cap

Pension Schemes earnings cap
Tax Year	Amount (£)
1989-90	60,000
1990-91	64,800
1991-92	71,400
1992-93	75,000
1993-94	75,000
1994-95	76,800
1995-96	78,600
1996-97	82,200
1997-98	84,000
1998-99	87,600
1999-00	90,600
2000-01	91,800
2001-02	95,400
2002-03	97,200
2003-04	99,000
2004-05	102,000
2005-06	105,600

The main effect of the cap is to set a ceiling on the contributions that can be paid to, and the benefits that can be paid by, tax approved pension schemes. It generally applies to people who contribute to a personal pension scheme, joined an occupational scheme set up since 14 March 1989, or joined any occupational scheme from 1 June 1989, which was set up before 14 March 1989. From 6 April 2001 the cap will apply to people who contribute to stakeholder pension schemes.

Tax Credits/Child Benefit

• Rates and thresholds

The rates and thresholds of the tax credits are shown below.

Working Tax Credit - £ per year (unless stated)
Rates and Thresholds	2006-07	2007-08
Basic element	£1,665	£1,730
Couple and lone parent element	£1,640	£1,700
30 hour element	£680	£705
Disabled worker element	£2,225	£2,310
Severe disability element	£945	£980
50+ Return to work payment (16-29 hours)	£1,140	£1,185
50+ Return to work payment (30+ hours)	£1,705	£1,770
Childcare element of the Working Tax Credit - £ per year (unless stated)
Rates and Thresholds	2006-07	2007-08
Maximum eligible cost for one child	£175 per week	£175 per week
Maximum eligible cost for two or more children	£300 per week	£300 per week
Percentage of eligible costs covered	80%	80%
Child Tax Credit - £ per year (unless stated)
Rates and Thresholds	2006-07	2007-08
Child Tax Credit Family element	£545	£545
Family element, baby addition	£545	£545
Child element	£1,765	£1,845
Disabled child element	£2,350	£2,440
Severely disabled child element	£945	£980
Income thresholds and withdrawal rates - £ per year (unless stated)
Rates and Thresholds	2006-07	2007-08
First income threshold	£5,220	£5,220
First withdrawal rate (per cent)	37%	37%
Second income threshold	£50,000	£50,000
Second withdrawal rate (per cent)	6.67%	6.67%
First threshold for those entitled to Child Tax Credit only	£14,155	£14,495
Income disregard	£25,000	£25,000
Child Benefit/Guardian Allowance - £ per week
Rates	2006-07	2007-08
Eldest/Only Child	£17.45	£18.10
Other Children	£11.70	£12.10
Eldest/Only Child (Lone Parent Rate)	£17.55	Abolished
Guardian’s Allowance	£12.50	£12.95

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