PART I THE CHARGE TO TAX
Income tax
1 The charge to income tax.
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 F14Schedules 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.
C1C22
M2 Where any Act enacts that income tax shall be charged for any year, income tax shall be charged for that year—
F15aa
in respect of so much of an individual’s total income as does not exceed £1,500, at such rate as Parliament may determine to be the starting rate for that year;
C3C4a
in respect of any income which does not fall within F4paragraph (aa) above or paragraph (b) below, at such rate as Parliament may determine to be the basic rate for that year;
F5C3C4b
in respect of so much of an individual’s total income as exceeds F6£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.
F162A
The amount up to which an individual’s income is by virtue of subsection (2) above chargeable for any year at the starting rate shall be known as the starting 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 F7F17starting 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.
C5C64
M4 If the retail prices index for the month of F9September preceding a year of assessment is higher than it was for the previous F9September, then, unless Parliament otherwise determines, subsection (2) above shall apply for that year as if for F10each 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 F18 and—
a
if the result in the case of the amount specified in subsection (2)(aa) above is not a multiple of £10, rounding it up to the nearest amount which is such a multiple, and
b
if the result in the case of the amount specified in subsection (2)(b) above is not a multiple of £100, rounding it up to the nearest amount which is such a multiple.
.
F19C85A
Subsection (4) above shall not require any change to be made in the amounts deductible or repayable under section 203 during the period beginning with 6th April and ending with 17th May in the year of assessment.
F115
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C5C76
The Treasury shall before each year of assessment make an order specifying the F12amounts which by virtue of subsection (4) above will be treated as specified for that year in subsection (2) above.
F136A
Where income tax at the basic rate has been borne on income chargeable at the F20starting 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.
F2C91A Application of lower rate to income from savings and distributions.
1
Subject to sections 469(2) F29, 686 and 720(5), 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
F33i
savings income falling within section 1(2)(aa), or
ii
income falling within section 1(2)(b),
shall, by virtue of this section, be charged for that year at the F26rate applicable in accordance with subsection (1A) below, instead of at the rate otherwise applicable to it in accordance with section 1(2)(aa) and (a).
F341AA
In subsection (1)(b)(i) above “savings income” means income to which this section applies other than—
a
income chargeable under Schedule F, or
b
equivalent foreign income falling within subsection (3)(b) below and chargeable under Case V of Schedule D.
F271A
The rate applicable in accordance with this subsection is—
a
in the case of income chargeable under Schedule F, the Schedule F ordinary rate;
b
in the case of equivalent foreign income falling within subsection (3)(b) below and chargeable under Case V of Schedule D, the Schedule F ordinary rate; and
c
in the case of any other income, the lower rate.
F311B
In relation to any year of assessment for which income tax is charged the lower rate is 20 per cent. or such other rate as Parliament may determine.
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 F25. . . ;
F30aa
any amount chargeable to tax under Case VI of Schedule D by virtue of section 714, 716 or 723;
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.
F285
For the purposes of subsection (1)(b) above and any other provisions of the Income Tax Acts—
a
so much of any person’s income as comprises income to which this section applies shall be treated as the highest part of his income; and
b
so much of that part as consists of—
i
income chargeable under Schedule F (if any), and
ii
equivalent foreign income falling within subsection (3)(b) above and chargeable under Case V of Schedule D (if any),
shall be treated as the highest part of that part.
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.
F326A
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
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).
F31B Rates of tax applicable to Schedule F income etc.
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.
2 Fractions of a pound, and yearly assessments.
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.
3 Certain income charged at basic rate.
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; F21. . .
c
F21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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.
4 Construction of references in Income Tax Acts to deduction of tax.
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.
F221A
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.
F241B
To the extent that section 118E (paying and collecting agents: deduction of tax) applies in relation to foreign dividend income—
a
subsections (1) and (1A) above shall not apply, and
b
any provision of that section of the kind mentioned in subsection (1) above shall be construed as referring to deduction or payment of income tax at the Schedule F ordinary rate in force for the relevant year of assessment.
For this purpose “foreign dividend income” means 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.
2
For the purposes of F23this 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.
5 Date for payment.
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