Income and Corporation Taxes Act 1988

Income tax U.K.

1 The charge to income tax. U.K.

(1) M1 Income tax shall be charged in accordance with the provisions of the Income Tax Acts in respect of all property, profits or gains respectively described or comprised in the [F1 Schedules A, D, E and F], set out in sections 15 to 20 or which in accordance with the Income Tax Acts are to be brought into charge to tax under any of those Schedules or otherwise.

(2) M2 Where any Act enacts that income tax shall be charged for any year, income tax shall be charged for that year—

[F2 (aa) in respect of so much of an individual’s total income as does not exceed £2,000, at such rate as Parliament may determine to be the lower rate for that year;]

(a) in respect of any income which does not fall within [F3 paragraph (aa) above or] paragraph (b) below, at such rate as Parliament may determine to be the basic rate for that year;

[F4 (b) in respect of so much of an individual’s total income as exceeds [F5 £20,700] at such higher rate as Parliament may determine]

but this subsection has effect subject to any provision of the Income Tax Acts providing for income tax to be charged at a different rate in certain cases.

[F6 (2A) The amount up to which an individual’s income is by virtue of subsection (2) above chargeable for any year at the lower rate shall be known as the lower rate limit.]

(3) M3 The amount up to which an individual’s income is by virtue of subsection (2) above chargeable for any year at the [F7 lower rate or the] basic rate shall be known as the basic rate limit,and the parts of income in excess of the basic rate limit which are specified in paragraph (b) of that subsection shall be known respectively as the first, second, third, fourth and fifth higher rate bandsF8 .

(4) M4 If the retail prices index for the month of [F9 September] preceding a year of assessment is higher than it was for the previous [F9 September], then, unless Parliament otherwise determines, subsection (2) above shall apply for that year as if for [F10 each of the amounts specified] in that subsection as it applied for the previous year (whether by virtue of this subsection or otherwise) there were substituted an amount arrived at by increasing the amount for the previous year by the same percentage as the percentage increase in the retail prices index and, if the result is not a multiple of £100, rounding it up to the nearest amount which is such a multiple.

F11 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) The Treasury shall before each year of assessment make an order specifying the [F12 amounts] which by virtue of subsection (4) above will be treated as specified for that year in subsection (2) above.

[F13 (6A) Where income tax at the basic rate has been borne on income chargeable at the lower rate any necessary repayment of tax shall be made on the making of a claim.]

(7) Part VII contains general provisions relating to the taxation of income of individuals.

Textual Amendments

F1 Words in s. 1(1) substituted (with effect as mentioned in Sch. 7 para. 32 of the amending Act) by Finance Act 1996 (c. 8), s. 79, Sch. 7 para. 2 (with Sch. 7 para. 33-35)

F2 S. 1(2)(aa) inserted (16.3.1992 with application for the year 1992-93 and subsequent years of assessment) by Finance Act 1992 (c. 20), s. 9(2)(10)(11).

F3 Words in s. 1(2)(a) inserted (16.3.1992 with application for the year 1992-93 and subsequent years of assessment) by Finance Act 1992 (c. 20), s. 9(3)(10)(11).

F4 1988(F) s.24(2)(a)for 1988-89.Previously

“(b) in respect of so much of an individual's total income as exceeds £17,900, at such higher rates respectively as Parliament may determine in relation to the first £2,500, the next £5,000, the next £7,900, the next £7,900 and the remainder;”.

F5 1990 s.17(1)(b)for 1990-91. (Art. 2(2)of S.I. 1990 No.677 (in Part III Vol.5)was not operated.)

F6 S. 1(2A) inserted (16.3.1992 with application for the year 1992-93 and subsequent years of assessment) by Finance Act 1992 (c. 20), s. 9(4)(10)(11).

F7 Words in s. 1(3) inserted (16.3.1992 with application for the year 1992-93 and subsequent years of assessment) by Finance Act 1992 (c. 20), s. 9(5)(10)(11).

F8 Repealed by 1988(F) s. 148 and Sch. 14 Part IV for 1988-89 and subsequent years

F9 Words in s. 1(4) substituted (27.7.1993 with effect for year 1994-95 and subsequent years of assessment) by 1993 c. 34, s. 107(2)(a)(8)

F10 Words in s. 1(4) substituted (16.3.1992 with application for the year 1992-93 and subsequent years of assessment) by virtue of Finance Act 1992 (c. 20), s. 9(6)(10)(11).

F11 S. 1(5) repealed (27.7.1993 with effect for the year 1994-95 and subsequent years of assessment) by 1993 c. 34, ss. 107(2)(b)(8), 213, Sch. 23, Pt.III

F12 Word in s. 1(6) substituted (16.3.1992 with application for the year 1992-93 and subsequent years of assessment) by virtue of Finance Act 1992 (c. 20), s. 9(7)(10)(11).

F13 S. 1(6A) inserted (16.3.1992 with application for the year 1992-93 and subsequent years of assessment) by Finance Act 1992 (c. 20), s. 9(8)(10)(11).

Modifications etc. (not altering text)

C1 See s.686—income of trustees chargeable at higher rate.

C2 S. 1(2) amended (1991-92) by S.I. 1991/732, art. 2(2)

S. 1(2) amended (1992-93) by 1992 c. 20, s. 10(2)(b) (in place of S.I. 1992/622, art. 2(2))

S. 1(2) amended (1993-94) by 1993 c. 34, s. 51(2) (in place of S.I. 1993/755, art. 2(2))

S. 1(2) amended (1994-95) by 1994 c. 9, s. 75(2) (in place of S.I. 1993/2948, art. 2(2))

S. 1(2)(b) amended (1995-96) by S.I. 1994/3012, art. 2(2)(b)

S. 1(2)(aa) amended (1995-96) by 1995 c. 4, s. 35(2) (in place of S.I. 1994/3012, art. 2(2)(a))

S. 1(2) amended (1996-97) by 1996 c. 8, s. 72(2) (in place of S.I. 1995/3031, art. 2(2))

S. 1(2)(b) amended (1997-98) by S.I. 1996/2952, art. 2(2)(b)

S. 1(2)(aa) amended (1997-98) by 1997 c. 16, s. 54(2) (in place of S.I. 1996/2952, art. 2(2)(a))

S. 1(2) amended (1998-99) by S.I. 1998/755, art. 2(2)

S. 1(2)(b) amended (1999-00) by S.I. 1999/597, art. 2(2)(b) (the effect of art. 2(2)(a) being superseded by 1999 c. 16, s. 22(1) which substitutes s. 1(2)(aa))

S. 1(2) amended (2000-01) by S.I. 2000/806, art. 2(2)

S. 1(2)(b) amended (2001-02) by S.I. 2001/638, art. 2(2)(b)

S. 1(2)(aa) amended (2001-02) by 2001 c. 9, s. 51(1) (in place of S.I. 2001/638, art. 2(2)(a))

S. 1(2) amended (2002-03) by S.I. 2002/707, art. 2(2)

S. 1(2) amended (2003-04) by S.I. 2003/840, art. 2

S. 1(2) amended (2004-05) by S.I. 2004/772, art. 2

S. 1(2) amended (2005-06) by S.I. 2005/716, art. 2

S. 1(2) amended (2006-07) by S.I. 2006/872, art. 2

S. 1(2) amended (2007-08) by S.I. 2007/943, art. 2

C3 See 1990 s.17(1)—basic rate 25%and higher rate 40%for 1990-91.

C4 For earlier years see Table C Vol.1.

C5 See—1988(F) s.24(2)—indexation not to apply for 1988-89.1990 s.17(1)—indexation not to apply for 1990-91.

C6 S. 1(4) excluded for the year 1991-92 by Finance Act 1991 (c. 31, SIF 63:1), s. 21(2)

S. 1(4) excluded for the year 1992-93 by Finance Act 1992 (c. 20), s. 10(2)(a)(5).

S. 1(4) excluded for the year 1993-94 by Finance Act 1993 (c. 34), s. 51(2)

S. 1(4) excluded for the year 1994-95 by Finance Act 1994 (c. 9), s. 75(2)

S. 1(4) excluded for the year 1995-96 by Finance Act 1995 (c. 4), s. 35(2)

S. 1(4) excluded for the year 1996-97 by Finance Act 1996 (c. 8), s. 72(2)

S. 1(4) excluded for the year 1999-00 by Finance Act 1999 (c. 16), s. 22(5)

S. 1(4) excluded for the year 2001-02 by Finance Act 2001 (c. 9), s. 51(2)

C7 See S.I. 1989 No. 467 in Part III Vol.5.

Marginal Citations

M1 Source—1970 s.1

M2 Source—1970 s.1; 1971 s.32(1); 1980 s.24(2); 1987 s.20(1)

M3 Source‐1980 s.24(3); 1984 Sch.7 3(5)

M4 Source—1980 s.24(4), (7), (9)

[F14 1A Application of lower rate to income from savings and distributions. U.K.

(1) Subject to sections 469(2) and 686, so much of any person’s total income for any year of assessment as—

(a) comprises income to which this section applies, and

(b) in the case of an individual, is not income falling within section 1(2)(b),

shall, by virtue of this section, be charged for that year at the lower rate, instead of at the rate otherwise applicable to it in accordance with section 1(2)(aa) and (a).

(2) Subject to subsection (4) below, this section applies to the following income—

(a) any income chargeable under Case III of Schedule D other than—

(i) relevant annuities and other annual payments that are not interest; and

(ii) amounts so chargeable by virtue of section 119 or 120;

(b) any income chargeable under Schedule F; and

(c) subject to subsection (4) below, any equivalent foreign income.

(3) The income which is equivalent foreign income for the purposes of this section is any income chargeable under Case IV or V of Schedule D which—

(a) is equivalent to a description of income falling within subsection (2)(a) above but arises from securities or other possessions out of the United Kingdom; or

(b) consists in any such dividend or other distribution of a company not resident in the United Kingdom as would be chargeable under Schedule F if the company were resident in the United Kingdom.

(4) This section does not apply to—

(a) any income chargeable to tax under Case IV or V of Schedule D which is such that section 65(5)(a) or (b) provides for the tax to be computed on the full amount of sums received in the United Kingdom; or

(b) any amounts deemed by virtue of section 695(4)(b) or 696(6) to be income chargeable under Case IV of Schedule D.

(5) So much of any person’s income as comprises income to which this section applies shall be treated for the purposes of subsection (1)(b) above and any other provisions of the Income Tax Acts as the highest part of his income.

(6) Subsection (5) above shall have effect subject to section 833(3) but shall otherwise have effect notwithstanding any provision requiring income of any description to be treated for the purposes of the Income Tax Acts (other than section 550) as the highest part of a person’s income.

(7) In this section “relevant annuity” means any annuity other than a purchased life annuity to which section 656 applies or to which that section would apply but for section 657(2)(a).]

Textual Amendments

F14 S. 1A inserted (with effect in accordance with s. 73(3) of the amending Act) by Finance Act 1996 (c. 8), s. 73(1)

Yn ddilys o 31/07/1997

[F15 1B Rates of tax applicable to Schedule F income etc. U.K.

(1) In the case of so much of an individual’s income which consists of—

(a) income chargeable under Schedule F (if any), and

(b) equivalent foreign income falling within section 1A(3)(b) and chargeable under Case V of Schedule D (if any),

as is income falling within section 1(2)(b), income tax shall, by virtue of this subsection, be charged at the Schedule F upper rate, instead of at the rate otherwise applicable to it in accordance with section 1(2)(b).

(2) In relation to any year of assessment for which income tax is charged—

(a) the Schedule F ordinary rate is 10 per cent., and

(b) the Schedule F upper rate is 32.5 per cent.,

or, in either case, such other rate as Parliament may determine.]

Textual Amendments

F15 S. 1B inserted (with effect in accordance with s. 31(6) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), s. 31(5)

2 Fractions of a pound, and yearly assessments. U.K.

(1) M5 The due proportion of income tax shall be charged for every fractional part of one pound.

(2) Every assessment and charge to income tax shall be made for a year commencing on the 6th April and ending on the following 5th April.

Marginal Citations

M5 Source—1970 s.2

3 Certain income charged at basic rate. U.K.

M6 Where a person is required to be assessed and charged with income tax in respect of any property, profits or gains out of which he makes any payment in respect of—

(a) any annuity or other annual payment (not being interest); or

(b) any royalty or other sum in respect of the user of a patent; or

(c) any rent, royalty or other payment which is declared by section F16 . . . 120 to be subject to deduction of tax under section 348 or 349 as if it were a royalty or other sum paid in respect of a patent;

he shall, in respect of so much of the property, profits or gains as is equal to the payment and may be deducted in computing his total income, be charged at the basic rate.

Textual Amendments

F16 Words in s. 3(1)(c) repealed (with effect in accordance with Sch. 29 Pt. 8(22) Note of the amending Act) by Finance Act 1995 (c. 4), s. 162, Sch. 29

Marginal Citations

M6 Source—1970 s.3; 1971 Sch.6 2

4 Construction of references in Income Tax Acts to deduction of tax. U.K.

(1) M7 Any provision of the Income Tax Acts requiring, permitting or assuming the deduction of income tax from any amount (otherwise than in pursuance of section 203) or treating income tax as having been deducted from or paid on any amount, shall, subject to any provision to the contrary, be construed as referring to deduction or payment of income tax at the basic rate in force for the relevant year of assessment.

[F17 (1A) As respects deductions from, and tax treated as paid on, any such amounts as constitute or (but for the person whose income they are) would constitute income to which section 1A applies, subsection (1) above shall have effect with a reference to the lower rate in force for the relevant year of assessment substituted for the reference to the basic rate in force for that year.]

(2) For the purposes of [F18 this section], the relevant year of assessment shall be taken to be (except where otherwise provided)—

(a) if the amount is an amount payable wholly out of profits or gains brought into charge to tax, the year in which the amount becomes due;

(b) in any other case, the year in which the amount is paid.

Textual Amendments

F17 S. 4(1A) inserted (with effect in accordance with s. 73(3) of the amending Act) by Finance Act 1996 (c. 8), s. 73(2)

F18 Words in s. 4(2) substituted (with effect in accordance with Sch. 6 para. 28 of the amending Act) by Finance Act 1996 (c. 8), s. 73, Sch. 6 para. 2

Marginal Citations

M7 Source—1971 s.36; 1975(No. 2) s.44(6)

5 Date for payment. U.K.

[F19 (1) M8 Subject to the provisions of the Income Tax Acts and in particular to subsection (2) below and section 203, income tax contained in an assessment for any year shall be payable on or before the 1st January in that year, or at the expiration of a period of 30 days beginning with the date of the issue of the notice of assessment, whichever is the later.

(2) Subject to subsection (3) below, income tax under Schedule D charged for any year on any individual or firm in respect of the profits or gains of any trade, profession or vocation and contained in an assessment for that year shall, instead of being payable in accordance with subsection (1) above, be payable in two equal instalments, the first on or before the 1st January in that year or at the expiration of the period referred to in subsection (1) above, and the second on or before the following 1st July; and the provisions of the Income Tax Acts as to the recovery of income tax shall apply to each instalment of the tax in the same manner as they apply to the whole amount of the tax.

(3) Where the date of the issue of the notice of assessment is later than the 1st June following the end of the year of assessment, subsection (2) above shall not have effect, and the tax shall be due and payable as provided in subsection (1) above.

(4) Except as otherwise provided by the Income Tax Acts, any income tax charged at a rate other than the basic rate [F20 or the lower rate] on—

(a) income from which income tax has been deducted (otherwise than under section 203); or

(b) income from or on which income tax is treated as having been deducted or paid; or

(c) income chargeable under Schedule F;

shall be due and payable on or before 1st December following the end of the year for which it is assessed, or at the expiration of a period of 30 days beginning with the date of the issue of the notice of assessment, whichever is the later.]

Textual Amendments

F19 S. 5 repealed (with effect in accordance with s. 199(2) and Sch. 26 Pt. 5(23) Note 2 of the amending Act) by Finance Act 1994 (c. 9), s. 258, Sch. 26 Pt. 5(23); S.I. 1998/3173, art. 2

F20 Words in s. 5(4) inserted (with effect in accordance with Sch. 6 para. 28 of the amending Act) by Finance Act 1996 (c. 8), s. 73, Sch. 6 para. 3

Modifications etc. (not altering text)

C8 See 1970(M) Part IX—interest on overdue tax.

Marginal Citations

M8 Source—1970 s.4; 1971 Sch.6 3; 1972 Sch.24 15; 1975(No. 2) s.44(1); 1980 s.61(1)