RMH Associates
Business & Accountancy Services
Income Tax
Rates and allowances - Income Tax Income Tax
allowances 2007-08 2008-09 2009-10 Personal Allowance
£5,225 £6,035 £6,475 Personal Allowance for people aged 65-74 (1) £7,550 £9,030 £9,490 Personal Allowance for people aged 75 and over (1) £7,690 £9,180 £9,640 Married Couple's Allowance (born before 6th April 1935 but aged under 75) (1)(2)(3) £6,285 £6,535 N/A Married Couple's Allowance aged 75 and over (1) (2) £6,365 £6,625 £6,965 Income limit for age-related allowances £20,900 £21,800 £22,900 Minimum amount of Married Couple's Allowance £2,440 £2,540 £2,670 Blind Person's Allowance £1,730 £1,800 £1,890 (1) These allowances reduce where the income is
above the income limit – by £1 for every £2 of income above the limit. However
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. (3) In the 2009-10 tax year all Married Couple's
Allowance claimants in this category will become 75 at some point during the
year and will therefore be entitled to the higher amount of the allowance - for
those aged 75 and over. Income Tax rates and
taxable bands 2007-08 Starting rate: 10% £0-£2,230 Basic rate: 22% £2,231-£34,600 Higher rate: 40% Over £34,
600 2008-09 2009-10 Starting rate for savings: 10%* £0-£2,320 £0-£2,440 Basic rate: 20% £0-£34,800 £0-£37,400 Higher rate: 40% Over
£34,800 Over
£37,400 * From 2008-09 there is a 10 per cent starting rate
for savings income only. If your non-savings income is above this limit then
the 10 per cent starting rate for savings will not apply. The rates available for dividends are the 10 per
cent ordinary rate and the 32.5 per cent dividend upper rate.
Banks and building societies will automatically deduct tax at a rate of 20% from interest earned, although non-taxpayers can apply to receive interest gross. However if a taxpayer is entitled to have any of his savings income taxed at 10%, he will be able to make a claim for a tax refund of up to £232
For example if Fern receives (all gross figures) a salary of £6,100, a dividend of £30,500 and bank interest of £4,000
Total income £40,600 less Personal Allowances (PA) of £6,035 = £34,565 taxable income
Non-savings income £6,100 - PA £6,035 = £65 x 20% = £13.00 tax
This leaves £2255 (£2320-£65) of the savings rate remaining x 10% = £225.50 tax
Savings income £4,000 - £2255 = £1745 x 20% = £349.00 tax
Dividend income £30,500 x 10% = £3,050.00 tax
Total tax due £3637.50 (an effective rate of 10.52%)
Tax deducted at source PAYE on salary £13 Savings at 20% £800 and Dividends at 10% £3,050 = £3863 tax
Tax Refund Due £225.50 which is equal to £2,225 x 10% (20% deducted v 10% due).