Finance Act 2008

Income tax

1 Charge and main rates for 2008-09

(1) Income tax is charged for the tax year 2008-09.

(2) For that tax year—

(a) the basic rate is 20%, and

(b) the higher rate is 40%.

2 Personal allowance for those aged under 65

(1) For the tax year 2008-09 the amount specified in—

(a) section 35 of ITA 2007, and

(b) section 257(1) of ICTA,

(personal allowance for those aged under 65) is replaced with “£6,035”.

(2) Accordingly—

(a) section 57 of ITA 2007, so far as relating to the amount specified in section 35 of that Act, and

(b) section 257C of ICTA, so far as relating to the amount specified in section 257(1) of that Act,

(indexation) do not apply for the tax year 2008-09.

(3) This section does not require a change to be made in the amounts deductible or repayable under PAYE regulations before 7 September 2008.

3 Personal allowances for those aged 65 and over

(1) For the tax year 2008-09—

(a) the amount specified in section 36(1) of ITA 2007 and section 257(2) of ICTA (personal allowance for those aged 65 to 74) is replaced with “£9,030”, and

(b) the amount specified in section 37(1) of ITA 2007 and section 257(3) of ICTA (personal allowance for those aged 75 and over) is replaced with “£9,180”.

(2) Accordingly—

(a) section 57 of ITA 2007, so far as relating to the amounts specified in sections 36(1) and 37(1) of that Act, and

(b) section 257C of ICTA, so far as relating to the amounts specified in section 257(2) and (3) of that Act,

(indexation) do not apply for the tax year 2008-09.

4 Basic rate limit

(1) In section 10 of ITA 2007 (income charged at main rates: individuals), for subsection (5) substitute—

“(5) The basic rate limit is £34,800.”

(2) The amendment made by subsection (1) has effect for the tax year 2008-09 and subsequent tax years.

(3) But until 7 September 2008 for the purpose of ascertaining the amounts deductible or repayable under PAYE regulations it may be assumed that the figure specified in section 10(5) of ITA 2007 for the tax year 2008-09 is £36,000.

5 Abolition of starting and savings rates and creation of starting rate for savings

(1) Section 6 of ITA 2007 (rates at which income tax is charged) is amended as follows.

(2) In subsection (1), omit paragraph (a).

(3) In subsection (2), omit “starting rate,”.

(4) In subsection (3), for paragraph (a) substitute—

“(a) section 7 (starting rate for savings),”.

(5) Accordingly, in the heading omit “starting rate,”.

(6) The amendments made by this section have effect for the tax year 2008-09 and subsequent tax years.

(7) Schedule 1 contains provision in connection with—

(a) the abolition of the starting rate and the savings rate, and

(b) the creation of the starting rate for savings.