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UK Rates and allowances

UK Rates and allowances
Tax rates
Note
2004/05
2003/04

Starting rate band to
£2,020
£1,960

Tax rate
10%
10%

Basic rate band - next
£29,380
£28,540

Non-savings rate
22%
22%

Savings rate
20%
20%

UK dividend rate
10%
10%

Higher rate - taxable income over
£31,400
£30,500

Higher tax rate
40%
40%

UK dividend rate
32.5%
32.5%

Trusts

Income tax rates and allowances - rate.co.uk

Tax rate
40%
34%

UK dividend rate
32.5%
25%

Allowances that reduce taxable income



Personal allowance (PA)
under 65
1
£4,745
£4,615


65 to 74
1,3
£6,830
£6,610


75 and over
1,3
£6,950
£6,720


Blind person's allowance

£1,560
£1,510

Allowances that reduce tax



Married couple's allowance (MCA)




Tax reduction
70 to 74
1,2,3
£572.50
£556.50


75 and over
1,2,3
£579.50
£563.50

The age-related allowances are progressively withdrawn if income exceeds
£18,900
£18,300

Minimum PA
£4,745
£4,615

Minimum MCA tax reduction
£221
£215

Tax Shelters



Enterprise Investment Scheme (EIS) up to
4
£200,000
£150,000

Venture Capital Trust (VCT) up to
5
£200,000
£100,000

Golden Handshake max.
£30,000
£30,000

Rent a Room - exempt on gross annual rent up to
£4,250
£4,250


Notes

Ages are as the end of the tax year. Ages for the MCA relate to the elder of husband or wife.

MCA is available only to those couples where at least one spouse was born before 6 April 1935.

The higher rates of personal allowances are reduced by £1 for each £2 of excess income over £18,900 (2003/04 £18,300) until the basic allowance is reached. Similar limits apply to the married couple's allowance: the loss of tax reduction is 10p for each £2 of excess income (only the husband's income is taken into account) until the minimum of £221 (2003/04 £215) is reached.

Subscription for new ordinary shares - 20% income tax relief. Also such investments by subscription are eligible for deferral of capital gains tax on unlimited gains re-invested.

Subscriptions for new ordinary shares - 20% income tax relief. For 2004/05 and 2014/06, additional income tax relief of 20% will be paid direct to the VCT.


Capital Gains Tax

Capital gains tax rates and bands are as follows:


2004/05
2003/04

Taxed as top slice of savings income



Annual exemption



- individual
£8,200
£7,900

- settlements (spread over total number)
£4,100
£3,950

Transfers between husband and wife living together are exempt



Chattels exemption



(proceeds per item or set)
£6,000
£6,000


Taper Relief

For gains realised after 5 April 1998 by individuals or trustees, indexation allowance is frozen and the gain reduced by a tapering relief. The value of the taper relief depends on whether or not the asset is a business asset, and on the number of complete years the asset has been held after 5 April 1998 (with an additional "bonus" year for non-business assets held on 16 March 1998).

Non-Business Assets

No. of complete years
held after 5 April 1998
% gain chargeable

1
100

2
100

3
95

4
90

5
85

6
80

7
75

8
70

9
65

10 or more
60



Business Assets

No of complete years
held after 5 April 1998
Disposals After 5 April 2002

% of gain chargeable

0
100

1
50

2 or more
25


Notes

1. Transfers between husband and wife living together are exempt.

2. Capital gains are regarded as the top slice of savings income. Rates of 10%, 20% and 40% will therefore apply to gains taxed on individuals, as appropriate. Gains taxed on trustees are usually taxed at the special trust rate of 40% (2003/04 34%).

Corporation Tax

Corporation tax rates and bands are as follows:

Financial Year Commencing
1 April 2004
1 April 2003

Taxable profits



First £10,000
0%
0%

Next £40,000
23.75%
23.75%

Next £250,000
19%
19%

Next £1,200,000
32.75%
32.75%

On profits over £1,500,000
30%
30%


From 1 April 2004, a minimum tax rate of 19% is charged when profits are distributed to individual shareholders by a company or group. Lower tax rates will continue to apply where profits are retained or distributed to other companies.

Capital Allowances

Motor Cars

On reducing balance (max. £3,000 p.a. per car)
25%

Plant and machinery

Small firms:

Allowance for the first year
50%

Writing down allowance on reducing balance
25%

Medium firms:

Allowance for the first year
40%

Writing down allowance on reducing balance
25%

Large firms:

Writing down allowance only on reducing balance
25%

Long Life Assets

Allowance for first year
6%

Writing down allowance for subsequent years on reducing balance
6%

Energy Saving Technology

All firms
100%

Electric and Low Emission Cars

Registered on or after 17 April 2002
100%

Buildings

Industrial buildings and qualifying hotels
4% of building cost p.a.

Commercial/Industrial buildings in an enterprise zone
100% of building cost

Agricultural buildings
4% of building cost p.a.

Research and Development
100%


Notes

1. Capital allowances allow the cost of capital assets to be written off against taxable profits. They replace the charge for depreciation in the business accounts, which is not allowable for tax relief.

2. A small firm is defined as a business that satisfies any two of the following conditions: (a) turnover £5,600,000 or less (b) assets £2,800,000 or less (c) not more than 50 employees.

3. A medium firm is defined as a business that satisfies any two of the following conditions: (a) turnover £22,800,000 or less (b) assets £11,400,000 or less (c) not more than 250 employees.

Value Added Tax

From
1 April 2004
10 April 2003

Standard rate
17.5%
17.5%

VAT fraction
7/47
7/47

Taxable Turnover Limits

Registration - last 12 months or next 30 days over
£58,000
£56,000

Deregistration - next 12 months under
£56,000
£54,000

Cash accounting scheme - up to
£660,000
£600,000

Optional flat rate scheme - up to
£150,000
£150,000

Annual accounting scheme - up to
£660,000
£600,000



Quarterly Return – Scale figure for private use of fuel


From 1 May 2004

Petrol
scale charge
VAT due per car

Up to 1400cc
£232
£34.55

1401cc - 2000cc
£293
£43.63

Over 2000cc
£432
£64.34

Diesel



Up to 2000cc
£216
£32.17

Over 2000cc
£273
£40.65


Inheritance Tax

Transfers on or Within Seven Years Before Death


2004/05
2003/04

Nil rate band to
£263,000
£255,000

Rate of tax on balance
40%
40%

Chargeable lifetime transfers
20%
20%


All lifetime transfers not covered by exemptions and made within seven years of death will be added back into the estate for the purpose of calculating the tax payable. This may then be reduced by taper relief.

Charge on Gifts Within 7 Years of Death

Years before death
0-3
3-4
4-5
5-6
6-7

Tax reduced by
0%
20%
40%
60%
80%



Main Relief’s

Business property:

- business or interest therein
100%

- qualifying shareholders in unquoted* companies
100%

- land, buildings, machinery, or plant used by transferor's controlled company or partnership
50%

Agricultural property
50% or 100%

*Unquoted companies include those listed on AIM


Main Exemptions

1. Transfers to UK domiciled spouse - exempt.

2. Transfers to non UK domiciled spouse - £55,000.

3. Annual exemption - per donor - £3,000.

4. Small gifts per donee - £250 p.a.

5. Gifts in consideration of marriage to bride and/or groom of: up to £5,000 by a parent, up to £2,500 by a grandparent, or up to £1,000 by any other person.

6. Normal gifts out of income - no limit.

7. Gifts to charities - exempt

Vehicle Benefits

Car Benefit

The tax you pay on your company car is governed by four factors:

1. the list price of the car, on the day before it was first registered, plus certain accessories,

2. the rate at which the car emits carbon dioxide (CO2),

3. the fuel type
(for most types of car, this is all the information you need to work out the taxable benefit)

4. your highest rate of income tax.

You can find your taxable percentage for 2004/05 using the following table:

CO2
Taxable %
CO2
Taxable %
CO2
Taxable %

in g/km
Petrol
Diesel
in g/km
Petrol
Diesel
in g/km
Petrol
Diesel

Less than 150
15%
18%
180 to 184
22%
25%
215 to 219
29%
32%

150 to 154
16%
19%
185 to 189
23%
26%
220 to 224
30%
33%

155 to 159
17%
20%
190 to 194
24%
27%
225 to 229
31%
34%

160 to 164
18%
21%
195 to 199
25%
28%
230 to 234
32%
35%

165 to 169
19%
22%
200 to 204
26%
29%
235 to 239
33%
35%

170 to 174
20%
23%
205 to 209
27%
30%
240 to 244
34%
35%

175 to 179
21%
24%
210 to 214
28%
31%
245 and over
35%
35%


How to find out how much CO2 your company car emits – see:

· the car’s V5 registration document

· your dealer

· the data pages of car magazines (current models)
· the Vehicle Certification Agency – www.vca.gov.uk

· the website of the Society of Motor Manufacturers and Traders - www.smmt.co.uk/co2/co2search.cfm

Reliable emissions data is not widely available for cars registered before 1 January 1998. For them, the following taxable percentages apply, regardless of fuel type:

Engine capacity
Taxable %

Up to 1400cc
15%

1401 - 2000cc
22%

Over 2000cc
32%


Van Benefit


Van under 4 years old
Van 4 years old, or over

Benefit per vehicle
£500
£350


Car fuel benefits

If the employee pays for the full cost of all fuel for private journeys (usually including home to work) there will be no car fuel benefit. In all other cases the full tax charge will be due.

The taxable car fuel benefit is, for 2004/05, calculated by multiplying £14,400 by the same percentage as applies (or would apply) for the car benefit.

Example: A company car driver has a car which, on the day before it was first registered, had a list price of £18,000. It runs on petrol, and emits 182 g/km of CO2.

If we assume the driver pays tax at 40%, the annual tax bill on the car is: £18,000 x 22% x 40% = £1,584

If the employer provides any fuel used for private journeys and is not re-imbursed for the cost, the 2004/05 tax bill for the fuel is: £14,400 x 22% x 40% = £1,267.20.

Mileage Allowances

For Employees Using Their Own Transport

The approved maximum tax and national insurance free mileage allowances for employees using their own transport for business are as follows:

Flat Rate
First 10,000 Miles
Miles over 10,000

Car
40p
25p

Motorcycle
24p
24p

Bicycle
20p
20p

Income Tax and NICs are due when allowances exceed these rates. Employees can claim tax relief on any shortfall.
Rates of up to 5p per mile, per passenger, are also tax and NIC free when paid for the carriage of fellow employees on the same business trip.



Fuel-Only Mileage Rates

Inland Revenue advisory mileage rates for employee private mileage reimbursement or employer reimbursement of business mileage are:


Petrol
Diesel
LPG

Up to 1400cc
10p
9p
6p

1401cc - 2000cc
12p
9p
7p

Over 2000cc
14p
12p
9p

Income tax and NICs may be due on higher rates and tax relief may be due on lower rates.


National Insurance Contributions

Class 1 (not contracted out)
Employer
Employee

payable on weekly earnings



£91.01 - £610
12.8%
11%

Over £610
12.8%
1%

Men 65 and over and
women 60 and over
as above
Nil




Class 1A (on relevant benefits)
12.8%
Nil




Class 1B (on PAYE settlement arrangement)
12.8%





Class 2 (Self employed)
£2.05 per week

Limit of net earnings for exception
£4,215 per annum




Class 3 (Voluntary)
£7.15 per week




Class 4 (* Self employed on profits)


£4,745 to £31,720
8%

Excess over £31,720
1%

*Exemption applies if state retirement age was reached by 6 April 2004.


Note

For those earning between £79 per week and £610 per week, employers receive a rebate of 1.0% on contracted out money purchase schemes or 3.5% on contracted out final salary schemes, and employees, a rebate of 1.6% for either scheme.

Key Dates and Deadlines

Income Tax (including Class 4 NIC)

31 July 2004
2003/04 second payment on account

31 January 2014
2003/04 balancing payment, and
2004/05 first payment on account

31 July 2014
2004/05 second payment on account

31 January 2006
2004/05 balancing payment, and
2014/06 first payment on account

Capital Gains Tax

31 January 2014
2003/04 Capital Gains Tax

31 January 2006
2004/05 Capital Gains Tax

Corporation Tax

9 months and one day after the end of the accounting period

Inheritance Tax

6 months after the end of the month of death or chargeable transfer.

For chargeable lifetime transfers between 6 April and 30 September, due date is 30 April in the following year.

Latest Filing/Issuing Deadlines -2003/04 PAYE Returns

19 May 2004
P14, P35, P38, and P38A and CIS36

31 May 2004
Issue P60s to employees

6 July 2004
P9D, P11D and P11Db - also issue copies to employees

2003/04 Class 1A National Insurance on Relevant Benefits

19 July 2004
Payment due

2004 Tax Return

31 January 2014
Last filing date


Some Useful Rates


Weekly Benefit


2004/05
2003/04

Basic Retirement Pension



Single person
£79.60
£77.45

Married couple
£127.25
£123.80

Child Benefit



First eligible child
£16.50
£16.05

Each subsequent child
£11.05
£10.75

Statutory Sick Pay (SSP)



Average weekly earnings £79 or over (2003/04 £77)
£66.15
£64.35

Statutory Maternity Pay (SMP)



90% of average weekly pay
First 6 weeks


Maximum £102.80. Minimum 90% average weekly pay
Next 20 weeks


Minimum rate
£71.10
£69.30

Adoption Pay (SAP)
26 weeks


Paternity Pay (SPP)
1 week or fortnight


Both SAP and SPP



90% of average weekly pay
Max £102.80
Min £71.10
Max £100.00
Min £69.30

Example rates:

Jobseekers Allowance



Single person
£55.65
£54.65

Married couple
£87.30
£85.75

National Minimum Wage



From 1 October 2003
£4.50 p.h.

From 1 October 2004
£4.85 p.h.






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