Income tax
| |
2005-06 |
2004-05 |
| Starting rate band to |
£2,090 |
£2,020 |
| Tax rate |
10% |
10% |
| Basic rate band – next |
£30,310 |
£29,380 |
| Non-savings income tax rate |
22% |
22% |
| Savings income tax rate |
20% |
20% |
| UK dividend income tax rate |
10% |
10% |
| Higher rate – income over |
£32,400 |
£31,400 |
| Normal tax rate |
40% |
40% |
| UK dividend income tax rate |
32.5% |
32.5% |
Allowances that reduce taxable income
(ages are as at end of the tax year)
| |
2005-06 |
2004-05 |
| Personal allowance (PA)
|
|
|
| – under 65
|
£4,895 |
£4,745 |
| – 65 to 74 |
£7,090 |
£6,830 |
| – 75 and over
|
£7,220 |
£6,950 |
Allowances that reduce tax payable
| |
2005-06 |
2004-05 |
| |
reduction in tax up to |
| Married Couple's Allowance (MCA)
|
|
|
| – either spouse over 65 |
£228 |
£221 |
| |
|
|
| Higher allowance
|
|
|
| – up to 74 |
£590.50 |
£572.50 |
| – 75 and over
|
£597.50 |
£579.50 |
| |
|
|
| The higher allowances are progressively withdrawn if income exceeds |
£19,500 |
|
Tax shelters
| |
2005-06 |
2004-05 |
| Enterprise investment schemes
| £200,000 |
£150,000 |
|
|
|
| Venture Capital Trust |
£200,000 |
£100,000 |
| |
|
|
| 'Rent a room' exempt on gross annual rent |
£4,250 |
£4,250 |
| |
|
|
| Construction Industry Scheme deduction rate |
18% |
18% |
Pensions & Savings
Pensions
| |
Overall % limit of net relevant earnings |
| Age at 6 April 2005 | Personal pensions |
Retirement annuities
|
35 or under |
17.5 |
17.5 |
36 - 45 |
20 |
17.5 |
46 - 50 |
25 |
17.5 |
51 - 55 |
30 |
20 |
56 - 60 |
35 |
22.5 |
| 61 - 74 |
40 |
27.5 |
| Subject to max. earnings
|
£105,600 |
No limit |
Qualifying contributions of up to £3,600 (before basic rate tax relief at source) may be made to personal pension schemes, including Stakeholder schemes. Contributions above this level may be made, subject to the limits above.
ISAs
| Overall investment limit |
|
£7,000 |
| Including cash maximum of
|
|
£3,000 |
Vehicles
Petrol and diesel car benefits system
| The taxable benefit is calculated as a percentage of the car's list price. The calculation begins with the car's CO2 emissions in grams per kilometre. Then deduct 140 and divide this result by 5. Round down (4.9 = 4) and then add 15 (petrol) or 18 (diesel). This result is the taxable percentage. |
|
Petrol |
Diesel |
| Minimum rate* |
15% |
18% |
| Maximum rate
|
35% |
35% |
| *Special rules apply to alternative fuel cars and very low emission diesel cars registered before 1 January 2006. |
Reliable emissions data is not widely available for cars first registered before January 1998. For them the taxable percentage figures are:
| Up to 1400cc | |
15% |
| 1401 - 2000cc |
|
22% |
| Over 2000cc
| |
32% |
Chargeable on employees earning £8,500 or over (including benefits) and directors.
The list price relates to the day before first registration and includes accessories. The price is subject to an upper limit of £80,000.
The list price is reduced by the employee's capital contribution when the car is first made available, subject to a maximum deduction of £5,000.
Special rules apply to cars at least 15 years old with a market value of £15,000 or more.
Van under 4 years at the end of the tax year, benefit £500, 4 years or over £350 per vehicle, which includes fuel for private use until 6 April 2007. Benefit increases to £3,000 from 6 April 2007.
Payments by employees for private use may reduce the above benefits.
Car fuel benefit
Where the cost of all fuel is borne by the employee, the fuel benefit is nil. Otherwise, the taxable benefit is calculated as the car benefit percentage (see above) of £14,400 and VAT becomes payable as follows:
VAT due per quarter per car
| |
Scale charge |
VAT due |
| |
Petrol |
Diesel |
Petrol |
Diesel |
| Up to 1400 cc |
£246 |
£236 |
£36.64 |
£35.15 |
| 1401 – 2000 cc |
£311 |
£236 |
£46.32 |
£35.15 |
| Over 2000 cc |
£457 |
£300 |
£68.06 |
£44.68 |
Inland Revenue mileage rates
Car: Approved rates for employees using their own cars for business are 40p per mile for the first 10,000 miles and 25p per mile thereafter. Income tax and NICs may be due on higher rates and tax relief on lower rates.
Fuel: From 1 July 2005 advisory rates for employee private mileage reimbursement or employer reimbursement of business mileage are:
| |
Petrol |
Diesel |
LPG |
| Up to 1400 cc |
10p |
9p |
6p |
| 1401 – 2000 cc |
12p |
9p |
7p |
| Over 2000 cc |
16p |
13p |
10p |
Corporation tax
Corporation tax
| Financial year to |
31 March 2006 |
31 March 2005 |
| Taxable profits |
|
|
|
|
| First |
£10,000 |
0% |
£10,000 |
0% |
| Next |
£40,000 |
23.75% |
£40,000 |
23.75% |
| Next |
£250,000 |
19% |
£250,000 |
19% |
| Next |
£1,200,000 |
32.75% |
£1,200,000 |
32.75% |
| Over |
£1,500,000 |
30% |
£1,500,000 |
30% |
Main capital allowances
Main capital allowances
| Motor cars |
25% |
Max £3,000 p.a. per car |
| Plant and machinery |
|
|
| first year allowance |
40% |
Small & medium firms |
| writing down allowance |
25% |
On reducing balance |
| Industrial and agricultural buildings |
4% |
Of building cost |
Value Added tax
Value Added tax
| From |
1 April 2005 |
1 April 2004 |
| Standard rate VAT |
17.5% |
17.5% |
| VAT fraction |
7/47 |
7/47 |
| Taxable turnover limits |
|
|
| Registration |
|
|
– last 12 months or coming
30 days over |
£60,000 |
£58,000 |
| Deregistration |
|
|
| – coming year under |
£58,000 |
£56,000 |
| Cash Accounting Scheme |
£660,000 |
£660,000 |
| Flat Rate Scheme |
£150,000 |
£150,000 |
| Note: Optional flat rate scheme for small businesses available from 25 April 2002. |
National Insurance contributions
National Insurance contributions
| Class 1 (not contracted out) |
Employer |
Employee |
| Lower earnings limit |
|
£91 |
| Payable on weekly earnings of |
|
|
| £94.01 – £630 |
12.8% |
11% |
| Over £630 |
12.8% |
1% |
| Men 65 and over and women 60 and over |
as above |
Nil |
| Class 1A |
On relevant benefits |
12.8% |
Nil |
| Class 2 |
Self-employed |
£2.10 per week |
| |
Limit of net earnings for exception |
£4,345 per annum |
| Class 3 |
Voluntary |
£7.35 per week |
| Class 4* |
Self-employed on profits |
|
|
| |
£4,895 - £32,760 |
8% |
| |
Excess over £32,760 |
1% |
| *Exemption applies if state retirement age is reached by 6 April 2005. |
Capital Gains tax
Capital Gains tax
| |
2005-06 |
2004-05 |
| Taxed as top slice of savings income |
Up to 40% |
Up to 40% |
| Annual exemption |
|
|
| – individual |
£8,500 |
£8,200 |
| – settlement |
£4,250 |
£4,100 |
| Transfers between husband and wife living together are exempt. |
Taper relief 2004-05 disposals
| Years |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
10 |
| Business assets — % relief |
50 |
75 |
75 |
75 |
75 |
75 |
75 |
75 |
75 |
75 |
| Non-business assets — % relief |
0 |
0 |
5 |
10 |
15 |
20 |
25 |
30 |
35 |
40 |
| Apportionment may apply where asset has not been a business asset throughout the entire period of ownership. *Add one year for non-business assets acquired before 17 March 1998. |
Inheritance tax
Inheritance tax
| |
2005-06 |
2004-05 |
| Nil rate band |
£275,000 |
£263,000 |
| Rate of tax on balance: |
|
|
| Chargeable lifetime transfers |
20% |
20% |
| Transfers on, or within 7 years of death |
40% |
40% |
| All lifetime transfers not covered by exemptions and made within seven years of death will be added back into the estate for the purpose of calculating the tax payable. This will then be reduced: |
Tax relief for gifts within 7 years of death
| Years before death |
0 - 3 |
3 - 4 |
4 - 5 |
5 - 6 |
6 - 7 |
| Tax on gift reduced by |
0% |
20% |
40% |
60% |
80% |
Main exemptions
Most transfers between husband and wife • The first £3,000 of lifetime transfers in any tax year (husband and wife each have own exemption) • Gifts of up to, but not exceeding, £250 p.a. to any number of persons • Gifts made out of income that form part of normal expenditure and do not reduce the standard of living • Gifts in consideration of marriage to bride and/or groom as follows: up to £5,000 by a parent, £2,500 by a grandparent, or £1,000 by any other person • Gifts to charities, whether made during lifetime or on death
Stamp taxes
Stamp duty is payable at a rate of 0.5% on transfers of shares and securities. On the transfers of other property, the rate is:
| Value up to £120,000* |
zero |
| Value £120,001 - £250,000 |
1% |
| Value £250,001 - £500,000 |
3% |
| Value over £500,000 |
4% |
| * 150,000 for property in qualifying areas |
Some useful rates
Some useful rates
| |
2005-06 |
2004-05 |
| |
£ |
£ |
| Basic retirement pension |
| – Single person |
82.05 |
77.45 |
| – Married couple |
131.20 |
127.25 |
| Child benefit |
| – First eligible child |
17.00 |
16.50 |
| – Each subsequent child |
11.40 |
11.05 |
| Statutory Sick Pay (SSP) |
| Standard rate (average weekly pay over £77) |
68.20 |
66.15 |
| Statutory Maternity Pay (SMP) |
| 90% of average weekly pay |
First 6 weeks
|
| Max. £106 Min. 90% average weekly Pay |
Next 20 weeks
|
| Minimum rate |
73.80
|
| Adoption (SAP) |
26 weeks
|
| Paternity (SPP) |
one week or fortnight
|
| SAP/SPP – 90% of avarage weekly pay Max. £100 Min. £73.80
|
| Example rates: |
| Jobseekers Allowance |
| – Single person – up to |
56.20 |
|
| – Married couple |
88.15 |
|
| National minimum wage |
| From October 2005 – over 21 |
£5.05 ph |
|
| From October 2005 – 18-21 |
£4.25 ph |
|
| From October 2005 – 16 & 17 |
£3.00 ph |
|
Key dates and deadlines
Key dates and deadlines
| |
|
2005-06 |
2004-05 |
| Income tax and Class 4 NIC |
| 1st payment on account |
31 January |
2006 |
2005 |
| 2nd payment on account |
31 July |
2006 |
2005 |
| Balancing payment |
31 January |
2007 |
2006 |
| Capital Gains tax |
31 January |
2007 |
2006 |
| Corporation tax |
9 months after the end of accounting period |
|
2004/05 returns filing/issuing deadlines |
| 19 May 2005 |
P14, P35, P38, P38A and CIS36 |
| 31 May 2005 |
Issue P60s to employees |
| 6 July 2005 |
P9D and P11D and P11Db – and appropriate copies to employees |
| 31 January 2006 |
Self-assessment tax return |
|
2004/05 Class 1A NICs on relevant benefits
|
| 19 July 2005 |
Payment due
|
