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Income Tax |
 What is Income Tax? Income tax is a tax on your income and is often paid through your employer whom will automatically deduct it from your pay each week/month. The tax is paid to the Inland Revenue. Employers will pay an employee's tax using the Pay As You Earn (PAYE) system. There are no age 'rules' as to when a person has to start paying income tax. If you are earning - you have to pay the tax. Those that are self-employed will commonly complete a self assessment form to calculate their income tax. There is a personal allowance figure which allows an employee to earn a certain amount tax free. The personal allowance figure will vary depending on your circumstances and age (see tables below). There are also different tax bands which have different rates of tax depending on your salary (see tables below). You can find more information about paying income tax by visiting our PAYE in the Small Business article
Income Tax 2007 / 2008 Rates
Income Tax Changes for 2007/2008 | 2006/2007 | 2007/2008 | Income Tax Allowances | Personal Allowance | 5035 | 5225 | Personal allowance for people aged 65-74 | 7280 | 7550 | Personal allowance for people aged 75 and over | 7420 | 7690 | Blind person's allowance | 1660 | 1730 | | | Allowances That Reduce Tax | Married couple's allowance - aged under 75 | 6065 | 6285 | Married couple's allowance - aged 75 or more
| 6135 | 6365 | Minimum amount of married couple's allowance | 2350 | 2440 |
| Capital Gains Tax Annual Exempt Amount | Individuals etc: | 8800 | 9200 | Other trustees:
| 4400 | 4600 |
| Inheritance Tax Threshold | 285,000 | 300,000 |
| Pension Schemes Earnings Cap (Since 6th April, this has been replaced by Lifetime and Annual allowance limits) | 108,600 (notional) | 112,800 (notional) |
Taxable Bands | 2006/2007 | 2007/2008 | Starting Rate | Income | up to 2150 | up to 2230 | Tax Rate | 10% | 10% | | | Basic Rate | Income | 2151 - 33,300 | 2231 - 34,600 | Normal Rate | 22% | 22% | Savings Rate | 20% | 20% | Dividends Rate | 10% | 10% | | | Higher Rate | Income | over 33,300 | over 34,600 | Normal Rate | 40% | 40% | Savings Rate | 40% | 40% | Dividends Rate | 32.5% | 32.5% |
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