Income Tax Act 2007

Chapter 2 U.K. Rates at which income tax is charged

The rates U.K.

6 The F1 ... basic rate[F2 , higher rate and additional rate] U.K.

(1) The main rates at which income tax is charged are—

F3 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) the basic rate, F4 ...

(c) the higher rate[F5 , and

(d) the additional rate.]

(2) The F6 ... basic rate[F7 , higher rate and additional rate] for a tax year are the rates determined as such by Parliament for the tax year.

[F8 (2A) Subsection (2) does not apply to the non-savings income of a Scottish taxpayer.

(2B) The basic rate, higher rate and additional rate for a tax year on the non-savings income of a Scottish taxpayer is to be found as follows.

• Step 1 Take the basic rate, higher rate or additional rate determined as such under subsection (2).

• Step 2 Deduct 10 percentage points.

• Step 3 Add the Scottish rate (if any) set by the Scottish Parliament for that year.

(2C) Chapter 2 of Part 4A of the Scotland Act 1998 makes provision about the meaning of “Scottish taxpayer” and the setting of the Scottish rate.]

(3) For other rates at which income tax is charged see—

[F9 (a) section 7 (starting rate for savings),]

(b) section 8 (dividend ordinary rate[F10 , dividend upper rate and dividend additional rate]), and

(c) section 9 (trust rate and dividend trust rate).

Textual Amendments

F1 Words in s. 6 heading omitted (21.7.2008 with effect in accordance with s. 5(6) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 5(5)

F2 Words in s. 6 heading substituted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 2(3)

F3 S. 6(1)(a) omitted (21.7.2008 with effect in accordance with s. 5(6) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 5(2)

F4 Word in s. 6(1)(b) omitted (with effect in accordance with s. 6(6) of the amending Act) by virtue of Finance Act 2009 (c. 10), s. 6(2)

F5 S. 6(1)(d) and preceding word inserted (with effect in accordance with s. 6(6) of the amending Act) by Finance Act 2009 (c. 10), s. 6(2)

F6 Words in s. 6(2) omitted (21.7.2008 with effect in accordance with s. 5(6) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 5(3)

F7 Words in s. 6(2) substituted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 2(2)

F8 S. 6(2A)-(2C) inserted (1.7.2012) (with effect in accordance with s. 26(8) of the amending Act) by Scotland Act 2012 (c. 11), ss. 26(2), 44(2)(3)(a)

F9 S. 6(3)(a) substituted (21.7.2008 with effect in accordance with s. 5(6) of the amending Act) by Finance Act 2008 (c. 9), s. 5(4)

F10 Words in s. 6(3)(b) substituted (with effect in accordance with s. 6(6) of the amending Act) by Finance Act 2009 (c. 10), s. 6(3)

[F11 7 The starting rate for savings U.K.

The starting rate for savings is 10%.]

Textual Amendments

F11 S. 7 substituted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by Finance Act 2008 (c. 9), Sch. 1 para. 2

8 The dividend ordinary rate[F12 , dividend upper rate and dividend additional rate] U.K.

(1) The dividend ordinary rate is 10%.

(2) The dividend upper rate is 32.5%.

[F13 (3) The dividend additional rate is [F14 37.5%].]

Textual Amendments

F12 Words in s. 8 heading substituted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 3(3)

F13 S. 8(3) inserted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 3(2)

F14 Figure in s. 8(3) substituted (17.7.2012) (with effect in accordance with s. 1(6) of the amending Act) by Finance Act 2012 (c. 14), s. 1(3)(a)

9 The trust rate and dividend trust rate U.K.

(1) The trust rate is [F15 45%].

(2) The dividend trust rate is [F16 37.5%].

Textual Amendments

F15 Words in s. 9(1) substituted (17.7.2012) (with effect in accordance with s. 1(6) of the amending Act) by Finance Act 2012 (c. 14), s. 1(3)(b)

F16 Words in s. 9(2) substituted (17.7.2012) (with effect in accordance with s. 1(6) of the amending Act) by Finance Act 2012 (c. 14), s. 1(3)(c)

Income charged at particular rates U.K.

10 F17 Income charged at the ... basic[F18 , higher and additional] rates: individuals U.K.

F19 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F20 (2) Income tax on an individual's income up to the basic rate limit is charged at the basic rate (except to the extent that, in accordance with section 12, it is charged at the starting rate for savings).]

(3) Income tax is charged at the higher rate on an individual's income above the basic rate limit [F21 and up to the higher rate limit.]

[F22 (3A) Income tax is charged at the additional rate on an individual's income above the higher rate limit.]

[F23 (3B) If the individual is a Scottish taxpayer, the basic rate, higher rate and additional rate are—

(a) on so much of the individual's income as is savings income, the rates determined as such under section 6(2);

(b) on so much of the individual's income as is not savings income, the rates determined as such under section 6(2B).

(3C) Section 16 has effect for determining which part of a Scottish taxpayer's income consists of savings income.]

(4) This section is subject to—

• F24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• section 13 (income charged at the dividend ordinary and dividend upper rates: individuals), and

• any other provisions of the Income Tax Acts which provide for income of an individual to be charged at different rates of income tax in some circumstances.

[F25 (5) The basic rate limit is [F26 £33,100 ].]

[F27 (5A) The higher rate limit is £150,000.]

[F28 (6) The basic rate limit [F29 and higher rate limit are] increased in some circumstances: see—

(a) section 414(2) (gift aid relief), and

(b) section 192(4) of FA 2004 (relief for pension contributions).

(7) See section 21 for indexation of the basic rate limit.]

Textual Amendments

F17 Word in s. 10 heading omitted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 1 para. 3(6)

F18 Words in s. 10 heading substituted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 4(6)

F19 S. 10(1) omitted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 1 para. 3(2)

F20 S. 10(2) substituted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by Finance Act 2008 (c. 9), Sch. 1 para. 3(3)

F21 Words in s. 10(3) inserted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 4(2)

F22 S. 10(3A) inserted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 4(3)

F23 S. 10(3B)(3C) inserted (1.7.2012) (with effect in accordance with s. 26(8) of the amending Act) by Scotland Act 2012 (c. 11), ss. 26(3), 44(2)(3)(a)

F24 S. 10(4) entry omitted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 1 para. 3(4)

F25 S. 10(5) substituted (21.7.2008 with effect in accordance with s. 4(2)(3) of the amending Act) by Finance Act 2008 (c. 9), s. 4(1)

F26 Sum in s. 10(5) substituted (with effect in accordance with art. 2 of the amending S.I.) by The Income Tax (Indexation) Order 2013 (S.I. 2013/3088), art. 2(a)

F27 S. 10(5A) inserted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 4(4)

F28 S. 10(6)(7) inserted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by Finance Act 2008 (c. 9), Sch. 1 para. 3(5)

F29 Words in s. 10(6) substituted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 4(5)

11 Income charged at the basic rate: other persons U.K.

(1) Income tax is charged at the basic rate on the income of persons other than individuals.

(2) This section is subject to—

• F30 ...

• section 14 (income charged at the dividend ordinary rate: other persons),

• Chapters 3 to 6 of Part 9 (which provide for some income of trustees to be charged at the dividend trust rate or at the trust rate), and

• any other provisions of the Income Tax Acts which provide for income of persons other than individuals to be charged at different rates of income tax in some circumstances.

Textual Amendments

F30 Words in s. 11(2) omitted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 1 para. 4

[F31 12 Income charged at the starting rate for savings U.K.

(1) Income tax is charged at the starting rate for savings (rather than the basic rate) on so much of an individual's income up to the starting rate limit for savings as is savings income.

(2) This is subject to any provisions of the Income Tax Acts (apart from section 10) which provide for income of an individual to be charged at different rates of income tax in some circumstances.

(3) The starting rate limit for savings is [F32 £2,880.]

(4) See section 21 for indexation of the starting rate limit for savings.

(5) Section 16 has effect for determining the extent to which a person's income up to the starting rate limit for savings consists of savings income.]

Textual Amendments

F31 S. 12 substituted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by Finance Act 2008 (c. 9), Sch. 1 para. 5

F32 Sum in s. 12(3) substituted (with effect in accordance with art. 2 of the amending S.I.) by The Income Tax (Indexation) Order 2013 (S.I. 2013/3088), art. 2(b)

13 Income charged at the dividend ordinary[F33 , dividend upper and dividend additional] rates: individuals U.K.

(1) Income tax is charged at the dividend ordinary rate on an individual's income which—

(a) is dividend income,

(b) would otherwise be charged at the F34 ... basic rate, and

(c) is not relevant foreign income charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis).

(2) Income tax is charged at the dividend upper rate on an individual's income which—

(a) is dividend income, F35 ...

(b) would otherwise be charged at the higher rate[F36 , and

(c) is not relevant foreign income charged in accordance with section 832 of ITTOIA 2005.]

[F37 (2A) Income tax is charged at the dividend additional rate on an individual's income which—

(a) is dividend income,

(b) would otherwise be charged at the additional rate, and

(c) is not relevant foreign income charged in accordance with section 832 of ITTOIA 2005.]

(3) Subsections (1) [F38 to (2A)] are subject to any provisions of the Income Tax Acts (apart from section 10) which provide for income to be charged at different rates of income tax in some circumstances.

(4) Section 16 has effect for determining the extent to which an individual's dividend income would otherwise be charged at the F39 ... basic[F40 , higher or additional] rate.

Textual Amendments

F33 Words in s. 13 heading substituted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 5(5)

F34 Words in s. 13(1)(b) omitted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 1 para. 6(a)

F35 Word in s. 13(2)(a) omitted (21.7.2008 with effect in accordance with s. 68(2) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 68(1)(a)

F36 S. 13(2)(c) and word inserted (21.7.2008 with effect in accordance with s. 68(2) of the amending Act) by Finance Act 2008 (c. 9), s. 68(1)(b)

F37 S. 13(2A) inserted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 5(2)

F38 Words in s. 13(3) substituted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 5(3)

F39 Word in s. 13(4) omitted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 1 para. 6(b)

F40 Words in s. 13(4) substituted (with effect in accordance with Sch. 2 para. 25 of the amending Act) by Finance Act 2009 (c. 10), Sch. 2 para. 5(4)

14 Income charged at the dividend ordinary rate: other persons U.K.

(1) Income tax is charged at the dividend ordinary rate on the income of persons other than individuals which—

(a) is dividend income,

(b) would otherwise be charged at the basic rate, and

(c) is not relevant foreign income charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis).

(2) This is subject to—

• Chapters 3 to 6 of Part 9 (which provide for some income of trustees to be charged at the dividend trust rate or at the trust rate),

• section 504(3) (treatment of income of unauthorised unit trust), and

• any other provisions of the Income Tax Acts (apart from section 11) which provide for income of persons other than individuals to be charged at different rates of income tax in some circumstances.

15 Income charged at the trust rate and the dividend trust rate U.K.

For the circumstances in which income tax is charged at the trust rate and the dividend trust rate, see Chapters 3 to 6 of Part 9.

16 Savings and dividend income to be treated as highest part of total income U.K.

(1) This section has effect for determining[F41 —

[F42 (za) which part of a Scottish taxpayer's income consists of savings income,]

(a) the extent to which a person's income up to the starting rate limit for savings consists of savings income, and

(b) the rate at which income tax would be charged on a person's dividend income apart from section 13.]

(2) It also has effect for all other income tax purposes except for the purposes of—

(a) section 491 (special rates not to apply to first slice of trustees' trust rate income), and

(b) sections 535 to 537 of ITTOIA 2005 (gains from contracts for life insurance etc: top slicing relief).

(3) If a person has savings income but no dividend income, the savings income is treated as the highest part of the person's total income.

(4) If a person has dividend income but no savings income, the dividend income is treated as the highest part of the person's total income.

(5) If a person has both savings income and dividend income—

(a) the savings income and dividend income are together treated as the highest part of the person's total income, and

(b) the dividend income is treated as the higher part of that part of the person's total income.

(6) See section 1012 for the relationship between—

(a) the rules in this section, and

(b) other rules requiring particular income to be treated as the highest part of a person's total income.

(7) References in this section to dividend income do not include dividend income which is relevant foreign income charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis).

Textual Amendments

F41 Words in s. 16(1) substituted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by Finance Act 2008 (c. 9), Sch. 1 para. 7

F42 S. 16(1)(za) inserted (1.7.2012) (with effect in accordance with s. 26(8) of the amending Act) by Scotland Act 2012 (c. 11), ss. 26(4), 44(2)(3)(a)

17 Repayment: tax paid at basic rate instead of [F43 starting rate for savings] U.K.

(1) This section applies if income tax at the basic rate has been paid on income on which income tax is chargeable at the [F44 starting rate for savings] .

(2) If a claim is made, any necessary repayment of tax must be made.

Textual Amendments

F43 Words in s. 17 heading substituted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by Finance Act 2008 (c. 9), Sch. 1 para. 8(3)

F44 Words in s. 17(1) substituted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by Finance Act 2008 (c. 9), Sch. 1 para. 8(2)

18 Meaning of “savings income” U.K.

(1) This section applies for the purposes of the Income Tax Acts.

(2) “Savings income” is income—

(a) which is within subsection (3) or (4), and

(b) which is not relevant foreign income charged in accordance with section 832 of ITTOIA 2005 (relevant foreign income charged on the remittance basis).

(3) Income is within this subsection if it is—

(a) income chargeable under Chapter 2 of Part 4 of ITTOIA 2005 (interest),

(b) income chargeable under Chapter 7 of Part 4 of ITTOIA 2005 (purchased life annuity payments), other than income from annuities specified in section 718(2) of that Act (annuities purchased from certain life assurance premium payments or under wills etc),

(c) income chargeable under Chapter 8 of Part 4 of ITTOIA 2005 (profits from deeply discounted securities), or

(d) income chargeable under Chapter 2 of Part 12 of this Act (accrued income profits).

(4) Income is within this subsection if—

(a) it is chargeable under Chapter 9 of Part 4 of ITTOIA 2005 (gains from contracts for life insurance etc), and

(b) an individual is, or personal representatives are, liable for income tax on it (under section 465 or 466 of that Act).

Modifications etc. (not altering text)

C1 S. 18 excluded by Taxes Management Act 1970 (c. 9), s. 18E(2)(b) (as inserted (with effect in accordance with s. 381(1)) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 7 para. 103 (with Sch. 9 paras. 1-9, 22))

19 Meaning of “dividend income” U.K.

(1) This section applies for the purposes of the Income Tax Acts.

(2) “Dividend income” is income which is—

(a) chargeable under Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc from UK resident companies),

(b) chargeable under Chapter 4 of that Part (dividends from non-UK resident companies),

(c) chargeable under Chapter 5 of that Part (stock dividends from UK resident companies),

(d) chargeable under Chapter 6 of that Part (release of loan to participator in close company), or

(e) a relevant foreign distribution chargeable under Chapter 8 of Part 5 of ITTOIA 2005 (income not otherwise charged).

(3) In subsection (2) “relevant foreign distribution” means a distribution of a non-UK resident company which—

(a) is not chargeable under Chapter 4 of Part 4 of ITTOIA 2005, but

(b) would be chargeable under Chapter 3 of that Part if the company were UK resident.

Starting rate limit and basic rate limit U.K.

F45 20 The starting rate limit and the basic rate limit U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F45 S. 20 omitted (21.7.2008 with effect in accordance with Sch. 1 para. 65 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 1 para. 10

21 Indexation of the [F46 basic rate limit and starting rate limit for savings] U.K.

(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.

F47 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(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.

[F48 (3A) The starting rate limit for savings for the tax year is the amount found as follows.

Step 1

Increase the starting rate limit for savings 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 savings 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 savings for the tax year.]

(4) Subsections [F49 (3) and (3A)] 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 [F50 sections 10 and 12] with the amounts which, as a result of subsections [F51 (3) and (3A)] , are the [F52 basic rate limit and starting rate limit for savings] for the tax year.

Textual Amendments

F46 Words in s. 21 heading substituted (21.7.2008) by Finance Act 2008 (c. 9), Sch. 1 para. 11(6)

F47 S. 21(2) omitted (21.7.2008) by virtue of Finance Act 2008 (c. 9), Sch. 1 para. 11(2)

F48 S. 21(3A) inserted (21.7.2008) by Finance Act 2008 (c. 9), Sch. 1 para. 11(3)

F49 Words in s. 21(4) substituted (21.7.2008) by Finance Act 2008 (c. 9), Sch. 1 para. 11(4)

F50 Words in s. 21(5) substituted (21.7.2008) by Finance Act 2008 (c. 9), Sch. 1 para. 11(5)(a)

F51 Words in s. 21(5) substituted (21.7.2008) by Finance Act 2008 (c. 9), Sch. 1 para. 11(5)(b)

F52 Words in s. 21(5) substituted (21.7.2008) by Finance Act 2008 (c. 9), Sch. 1 para. 11(5)(c)

Modifications etc. (not altering text)

C2 S. 21 excluded (21.7.2009) by Finance Act 2009 (c. 10), s. 2(2)

C3 S. 21 excluded (19.7.2011) by Finance Act 2011 (c. 11), s. 2(2)

C4 S. 21 excluded (17.7.2012) by Finance Act 2012 (c. 14), s. 2(2)

C5 S. 21 excluded (17.7.2013) by Finance Act 2013 (c. 29), s. 3(2)