Part 3Personal reliefs

Chapter 4General

C3C9C2C6C8C5C4C1C11C7C1057Indexation of allowances

1

This section provides for increases in the amounts specified in—

a

section F435(1)F7(personal allowance),

F14b

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F8c

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d

section 38(1) (blind person's allowance),

e

section 43 (tax reductions for married couples and civil partners: the minimum amount),

f

section 45(3)(a) F1... (marriages before 5 December 2005),

g

section 46(3)(a) F10... (marriages and civil partnerships on or after 5 December 2005), and

h

sections 36(2), F2... 45(4) and 46(4) (adjusted net income limit).

2

It applies if the F5consumer prices index for the September before the start of a tax year is higher than it was for the previous September.

3

For the tax year—

a

the allowances specified in sections F635(1)F16and 38(1),

b

the amounts specified in sections 45(3)(a) F17... and 46(3)(a) F17..., and

c

the minimum amount specified in section 43,

are found as follows.

Step 1

Multiply the allowance, amount or (as the case may be) the minimum amount for the previous tax year by the same percentage as the percentage increase in the F12consumer prices index.

Step 2

If the result of Step 1 is a multiple of £10, it is the increase 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 increase for the tax year.

Step 3

Add the increase for the tax year to the allowance, amount or (as the case may be) the minimum amount for the previous tax year.

The result is the allowance, amount or (as the case may be) the minimum amount for the tax year.

4

For the tax year, the adjusted net income limits specified in sections F13... F9... 45(4) and 46(4) are found as follows.

Step 1

Increase the adjusted net income limit for the previous tax year by the same percentage as the percentage increase in the F3consumer prices index.

Step 2

If the result of Step 1 is a multiple of £100, it is the adjusted net income 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 adjusted net income limit for the tax year.

5

Subsections (1) to (4) 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.

6

Before the start of the tax year the Treasury must make an order replacing the amounts specified in the provisions listed in subsection (1) with the amounts which, as a result of this section, are the allowances, amounts, the minimum amount and the adjusted net income limits for the tax year.

F117

In this section “consumer prices index” means the all items consumer prices index published by the Statistics Board.

F158

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