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Income Tax| Tax rates | Note | 2006/07 | 2005/06 | | Starting rate band to | £2,150 | £2,090 | | Tax rate | 10% | 10% | | Basic rate band - next | £31,150 | £30,310 | | Non-savings rate | 22% | 22% | | Savings rate | 20% | 20% | | UK dividend rate | 10% | 10% | | Higher rate - taxable income over | £33,300 | £32,400 | | Higher tax rate | 40% | 40% | | UK dividend rate | 32.5% | 32.5% | | Trusts | | | | Tax rate | 40% | 40% | | UK dividend rate | 32.5% | 32.5% | | Allowances that reduce taxable income | | | | Personal allowance (PA) | under 65 | 1 | £5,035 | £4,895 | | | 65 to 74 | 1,3 | £7,280 | £7,090 | | | 75 and over | 1,3 | £7,420 | £7,220 | | | Blind person's allowance | | £1,660 | £1,610 | | Allowances that reduce tax | | | | Married couple's allowance (MCA) | | | | | Tax reduction | 72 to 74 | 1,2,3 | £606.50 | £590.50 | | | 75 and over | 1,2,3 | £613.50 | £597.50 | | The age-related allowances are progressively withdrawn if income exceeds | £20,100 | £19,500 | | Minimum PA | £5,035 | £4,895 | | Minimum MCA tax reduction | £235 | £228 | | Tax Shelters | | | | Enterprise Investment Scheme (EIS) up to | £400,000 | £200,000 | | Venture Capital Trust (VCT) up to | £200,000 | £200,000 | | Golden Handshake max. | £30,000 | £30,000 | | Rent a Room - exempt on gross annual rent up to | £4,250 | £4,250 |
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Notes - Ages are as the end of the tax year. Ages for the MCA relate to the elder of spouse or civil partner
- MCA is available only to those couples where at least one spouse or civil partner was born before 6 April 1935.
- The higher rates of personal allowances are reduced by £1 for each £2 of excess income over £20,100 (2005/06 £19,500) until the basic allowance is reached. Similar limits apply to the married couple's allowance: the loss of tax reduction is 10p for each £2 of excess income until the minimum of £235 (2005/06 £228) is reached. (For couples married before 5 December 2005, only the husband's income is taken into account. For those married on or after 5 December 2005 or in a civil partnership, only the higher earner’s income is taken into account).
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